Why should I choose AnalystNotes?
Simply put: AnalystNotes offers the best value and the best product available to help you pass your exams.
Basic Question 0 of 13
A forward contract is priced at $129. A European option on the forward contract has an exercise price of $135 and expires in 49 days. The continuously compounded risk-free rate is 3.75% and volatility is 0.25. Calculate the prices of a call option and a put option on the forward contract.
User Contributed Comments 4
| User | Comment |
|---|---|
| danlan2 | 129 is the future price. |
| NIKKIZ | It seems to me that there's a bit missing from the calculation of N(d1). I think it should be: {ln(129/135)+[0.0375+(0.25^2/2)]0.13425}/[0.25 X 0.13425^0.5]. The answer would be -0.39553. Am I missing something? |
| Greatrussian | NIKKIZ: The risk free rate 0.0375 should not be used in the calculation of d1. |
| maxsouto | NIKKIZ: The value of an option can't be less than 0 |
Thanks again for your wonderful site ... it definitely made the difference.
Craig Baugh
Learning Outcome Statements
compare stable dividend with constant dividend payout ratio, and calculate the dividend under each policy;
describe broad trends in corporate payout policies;
CFA® 2025 Level II Curriculum, Volume 3, Module 16.