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PV of immediate coupons =
Price of Bond = $ 834.79
te for similar maturity + default spread)
OPTION WORKSHEET: LONG TERM OPTIONS
VALUING A LONG TERM OPTION WITH DIVIDEND ADJUSTMENT
This program calculates the value of a long term option (> 1 year)
adjusting for dividends using the expected dividend
yield on the current value of the asset.
Assumptions
1. All the assumptions underlying the BlackScholes model apply
2. The dividend yield over the lifetime of the option is known and a constant.
The user has to input the following variables
1. Current market value of the underlying asset
2. Variance in the ln(value) of the underlying asset
3. Strike price of the option
4. Riskless interest rate that corresponds to the life of the option
5. Time to expiration on the option
6. Expected dividend yield on the underlying asset.
OPTION WORKSHEET: LONG TERM OPTIONS
Inputs relating the underlying asset
Enter the current stock price = $32.50 (in currency)
Inputs relating to the option
Enter the number of shares that you can convert a bond into = 25.32
Enter the strike price on the conversion option = $15.91 (in currency)
General Inputs
Enter the riskless rate that corresponds to the option lifetime = 5.00% (in %)
OPTION WORKSHEET: LONG TERM OPTIONS
d1 = 0.6518478346
N(d1) = 0.7427503301
d2 = 0.7174585592
N(d2) = 0.2365455989
Value per call = $12.85
Value of conversion option = $325.49