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Mr. Gregory White
Mr. Gregory White, Master's Degree
Category: Single Problem
Satisfied Customers: 5240
Experience:  M.A., M.S. Education / Educational Administration
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Ricardo International would like you to demonstrate your

Customer Question

Ricardo International would like you to demonstrate your knowledge of the Black-Scholes option pricing model by finding the call price of an U.S. call option with the following characteristics: stock price = $60 exercise price = $60 risk-free rate is 12%
volatility (variance of stock returns) = 9% per year time to maturity = 6 months I found a calculator online however, i need to be able show how I worked the formula. I have no plans on purchasing a finance calculator.
Submitted: 1 year ago.
Category: Single Problem
Expert:  F. Naz replied 1 year ago.

Do you want to solve it by formula or by calculator

Customer: replied 1 year ago.
By formula please. Keep in mind that it is U.S. options
Expert:  F. Naz replied 1 year ago.

AS there is no dividend payment has been shown therefore there is no difference between European option and American option under the Black Scholes model as the model can not be used for American option for dividend payments.

Customer: replied 1 year ago.
how would that information be worked through the formula
Expert:  F. Naz replied 1 year ago.

Okay will try to answer but not sure.

Customer: replied 1 year ago.
As I have said before, I can put the info into a online calculator. However, my professor wants us to use the formula and I do not have a finance calculator.
Expert:  F. Naz replied 1 year ago.

Sorry unable to do this

Expert:  Mr. Gregory White replied 1 year ago.

Are you just needing this one done with the formula? You will still need to know how to do these with the formula itself (which requires extensive work). If still needed, let me know and I will put this into a formula work for you tomorrow but, as I said, it is difficult to use the formula as quite a bit of work required. Most instructors allow the use of calculators with the functions...

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