Assume That the Current Price of FGX Stock Is $35,that

question 4

Essay

Assume that the current price of FGX stock is $35,that a 6 month call option on the stock has a strike or exercise price of $33.00,the risk free rate is 4%,and that you have calculated N(d₁)as .65 and N(d2)as .55.Use the Black-Scholes model to calculate the price of the option.

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Definitions:

Average Rate of Return

A measure of the profitability of an investment, calculated by dividing the average annual profit by the initial investment cost.

Present Values

The current valuation of a future financial gain or series of payments, after applying a specific return rate.

Net Present Value Method

A valuation method that calculates an investment's worth by determining the present value of its expected future cash flows, subtracting the initial investment cost.

Capital Investment Analysis

The process of evaluating investments in physical assets to determine their potential for profit.