Suppose Stock XYZ was trading at $50 and the 1 year call and put option on the stock both had an exercise price of $60. The annual standard deviation of the stock price = 10%. Assume the risk-free rate at the time was 5%. Obtain the estimated value of the (i) call and (ii) the put option, using the Black-Scholes Option Pricing Method.
After obtaining the parameters, d1 and d2 from the Black-Scholes formula, choose the appropriate values for N(d1) and N(d2) from the list of values of provided above.
( The following cumulative probability distribution functions, N(d) can be calculated from the table: N ( -1.2732) = 0.10145 ;
N( -1.3732) = = 0.08482;
[ Note, N(-d1) = 1 – N(d1), and N(-d2) = 1 – N(d2) ]