2011 Spring, FIN 6100, Homework 7, Answer Key
Scan of pg. 648 from Ross, Westerfield, and Jaffie, 6th edition
22.20) Price = 52 Numerator of d1 = 0.10338
Exercise Price = 48 Denominator of d2 = 0.11547
Discount Rate per Year = 5% d1 = 0.89526
Time (in Years) = 0.33 d2 = 0.77979
Variance = 0.04
d1 = 0.8953
d2 = 0.7798
N(d1) = 0.8147
N(d2) = 0.7822
Value = $ 5.44
2011 Spring, FIN 6100, Homework 7, Answer Key
Scan of pg. 648 from Ross, Westerfield, and Jaffie, 6th edition
21) a) Price = 45 Numerator of d1 = -0.01208
Exercise Price = 52 Denominator of d2 = 0.44721
Discount Rate per Year = 6.5% d1 = -0.02701
Time (in Years) = 0.50 d2 = -0.47423
Variance = 0.40
d1 = -0.0270
d2 = -0.4742
N(d1) = 0.4892
N(d2) = 0.3177
Value of a Call = $ 6.02
b) Value of a Put = $ 11.36
2011 Spring, FIN 6100, Homework 7, Answer Key
Scan of pg. 648 from Ross, Westerfield, and Jaffie, 6th edition
22.22) a) Price = 70 Numerator of d1 = -0.15881
Exercise Price = 90 Denominator of d2 = 0.35355
Discount Rate per Year = 6.0% d1 = -0.44920
Time (in Years) = 0.50 d2 = -0.80275
Variance = 0.25
d1 = -0.4492
d2 = -0.8027
N(d1) = 0.3266
N(d2) = 0.2111
Value of a Call = $ 4.43
b) Value of a Put = $ 21.77
2011 Spring, FIN 6100, Homework 7, Answer Key
Scan of pg. 648 from Ross, Westerfield, and Jaffie, 6th edition
22.23) a) Price = 37 Numerator of d1 = 0.12757
Exercise Price = 35 Denominator of d2 = 0.06325
Discount Rate per Year = 7.0% d1 = 2.01706
Time (in Years) = 1.00 d2 = 1.95381
Variance = 0.004
d1 = 2.0171
d2 = 1.9538
N(d1) = 0.9782
N(d2) = 0.9746
Value of a Call = $ 4.39
b) Price = 37 Numerator of d1 = 0.12877
Exercise Price = 35 Denominator of d2 = 0.08000
Discount Rate per Year = 7.0% d1 = 1.60962
Time (in Years) = 1.00 d2 = 1.52962
Variance = 0.0064
d1 = 1.6096
d2 = 1.5296
N(d1) = 0.9463
N(d2) = 0.9369
Value of a Call = $ 4.44
c) Price = 35 Numerator of d1 = 0.07320
Exercise Price = 35 Denominator of d2 = 0.08000
Discount Rate per Year = 7.0% d1 = 0.91500
Time (in Years) = 1.00 d2 = 0.83500
Variance = 0.0064
d1 = 0.9150
d2 = 0.8350
N(d1) = 0.8199
N(d2) = 0.7981
Value of a Call = $ 2.65
2011 Spring, FIN 6100, Homework 7, Answer Key
Scan of pg. 648 from Ross, Westerfield, and Jaffie, 6th edition
22.24) Price = 27 Numerator of d1 = 0.10944
Exercise Price = 25 Denominator of d2 = 0.13761
Discount Rate per Year = 7.0% d1 = 0.79530
Time (in Years) = 0.33 d2 = 0.65769
Variance = 0.06
d1 = 0.7953
d2 = 0.6577
N(d1) = 0.7868
N(d2) = 0.7446
Value of a Call = $ 3.05
2011 Spring, FIN 6100, Homework 7, Answer Key
Scan of pg. 648 from Ross, Westerfield, and Jaffie, 6th edition
10) Exercise Price = $40
Time = 1
Value of a Call = $8
Value of a Put = $2
Risk-Free Rate = 10%
Price = $42.19