A. A call option matures in 6 month. The underlying stock price is $50 and the standard deviation of tocks return is 14 percent per year. The risk free rate is 5% per annum.
The exercise price is $60. What is the price of the call option? ( Show all workings)
B. Fill in the blanks with the correct terms which relates to option contracts.
1. The rights to sell an underlying asset is known as a ___________ option?
2. If the options contract allows you to exercise it only on the maturity date, it is know as a __________ option.
3. The price at which an option seller sell you an option contract is known as option___________.
4. Intrinsic value lus time value is equal to ____________ value of the option.
5. When you buy a share of stock and buy a put otion on the same share of stock it is known as ______________.