The price of a european put option on celgene

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Reference no: EM132020200

The current market price of stock in Celgene (CELG) is $90.70 a share. CELG is not expected to pay a dividend during the next six months. The continuously compounded risk- free interest rate is 2.00 percent per year (0.02). A call option on CELG with a strike price of $95 and six months to expiration has a Black-Scholes model price of $6.90 and a hedge ratio of 0.4831, based on a value for d1 of –0.04233. Assuming the yearly standard deviation of return for CELG’s stock is 32.54 percent (.3254), and that the present value of a risk-free $1 due in six months is $0.990023, determine

a. the risk-adjusted probability (the value of N (d ) ) that an American call option on CELG €

A. with a $95 strike price and six months to expiration will finish in-the-money

B. the price of a European put option on CELG having a strike price of 95 and six months to expiration.

Reference no: EM132020200

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