Use the Black-Scholes Model to Calculate the Theoretical Value of a DBA

question 64

Essay

Use the Black-Scholes model to calculate the theoretical value of a DBA December 45 call option.Assume that the risk free rate of return is 6 percent,the stock has a variance of 36 percent,there are 91 days until expiration of the contract,and DBA stock is currently selling at $50 in the market.

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Definitions:

Pension Expense

The cost recognized by an employer for contributions to pension plans on behalf of its employees for the current period.

Salaries Expense

An account that represents the total amount paid to employees for services rendered during a specific period, usually before any deductions.

Quick Ratio

A measure of a company's ability to meet its short-term obligations with its most liquid assets, excluding inventories.

Current Portion

Refers to the portion of long-term debt or leases that is due to be paid within the next year.