The work has not been graded but I like the output that was submitted to me. Is it possible for the same prof to do the next assignment I will be submitting? If possible, I will greatly appreciate it.
Consider the following questions on the pricing of options on the stock of ARB. a. A share of ARB sells for $65 and has a standard deviation of 20%. The current risk free rate is 9% and the stock pays two dividends: (1) $2.00 dividend just prior to the option’s expiration date, which is 91 days from now (exactly one-quarter of a year); and (2) a $2.00 dividend 182 days from now (i.e., exactly one-half year). Calculate the Black-Scholes value for a European-style call option with an exercise price of $70. b. What would be the price of a 91-day European-style put option on ARB having the same exercise price? c. Calculate the change in the call option s value that would occur if ARB’s management suddenly decided to suspend dividend payments and this action had no effect on the price of the company s stock? d. Briefly describe (without calculations) how your answer in Part a would differ under the following separate circumstances: (1) the volatility of ARB stock increases to 30% and (2) the risk free rate decreases to 8%.
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