Practice Quiz 4 – Chapter 5: FIN 403 Prof. Stivers Name: ________________________ 1. Consider the following European call option on a stock (that pays no dividends). Show all work including the rc, d1, d2, N(d1), and N(d2) calculations. Initial Stock Price: $79 Exercise Price: $80 Risk-free rate (discrete, annualized): 5% Stock Return Standard Deviation: 45% (annualized); Option-life: 72 days a) Using the standard Black-Scholes model (given below), what is the fair price for the option? b) Would the estimated price of this call from part a) also be a fair estimate of the value of a comparable American-style call option? Why or why not?

    b) No, this what we bear adapted aloft is the discretion price coercion european discretion. These discretions can singly be exercised at expiration. But coercion American discretions, these can be exercised any time among the discretion personality. So appraise of American discretion allure be greater than or correspondent to discretion appraise of european discretion .

    let me perceive if you bear any doubts