Exam 13: Valuing Stock Options: the Black-Scholes-Merton Model

For equities it is usually assumed that the number of trading days in the year is:

The Black, Scholes and Merton pathbreaking papers on stock option pricing were published in: choose one)

A stock price is $100. Volatility is estimated to be 20% per year. What is the estimate of the standard deviation of the change in the stock price in one week? choose one)

The Black-Scholes-Merton model assumes: choose one)

When there are dividends: choose one)

What is the price of the put option in the previous question if there is a dividend payment of $0.40 in 3 months? _ _ _ _ _ _ _ _

Volatility can be defined as: choose one)

The risk-free rate is 5% and the expected return on a stock is 12%. A derivative can be valued by: choose one)

In the Black-Scholes-Merton option pricing formula, Nd₁) denotes: choose one)

The VIX index measures choose one)

A 7-month European put option on the stock of Telstra has an exercise price of $4.80. The current stock price is $4.50, the risk-free rate is 8% per annum, and the volatility is 30% per annum. Calculate the price of the put option using the Black-Scholes-Merton formula. _ _ _ _ _ _ _ _