S $50 per share

E $50
Q 35000 European call options
σ 53%
R 6% continuously compounded
NPER 5

d1 0.8457
d2 -0.3394
N(d1) 0.8011
N(d2) 0.3671

Call price $26.46 per option

ValueOf $926,012.29
S $53 per share
E $53
Q 25000 European call options
σ 57%
R 5% continuously compounded
NPER 3
Annual salary $350,000
PV(Salary) $918,510.62

d1 0.6456
d2 -0.3417
N(d1) 0.7407
N(d2) 0.3663

Call price $22.55 per option

ValueOf $563,725.80
Contract value $1,482,236.42
Q 5000000 millions gallons of gasoline in three months
Future price $1.85 per gallon in three months
Current price $1.63 per gallon
σ 61% Of price
R 1.5% per year
NPER 4

u 1.3566
d 0.7371
ΔIncreasePrice 35.66%
ΔDecreasePrice -26.29%

PUp $2.21
PDown $1.20
Value with price increase $0.36

R 1.81%
ProbabilityOfIncrease 45.35%
ProbabilityOfDrecrease 54.65%
C $0.161 per gallon
Value of contract $807,150.25
E $60,000,000 to construct
S $53,500,000
S1 $65,500,000 If demand increases
S1 $50,200,000 If demand decreases
R_EAR 4.8% can borrow and lend
NPER 1
Call price $1,800,000 recently offered by a local competitor for the right to build an office building on the

ReturnRise 22.43%
ReturnFall -6.17%
ReturnRise $ $5,500,000
ReturnFall $ $0

ProbabilityRise 38.35%
ProbabilityFall 61.65%

Expected payoff at expiration $2,109,411.76

PV $2,012,797.49 Price of real option

Accept|Reject Reject
an office building on the land
TheCurrentMarketPrice $40 of crude oil per barrel
Q 750000 barrels of oil
E $60,000,000
Treasury bills 4% continuously compounded
σ 50% returns on the price of crude oil
NPER 1
S $30,000,000

d1 -1.0563
d2 -1.5563
N(d1) 0.1454
N(d2) 0.0598

C $914,095.24 Call price or Max Bid

TheCurrentPriceOfSteel $650 per ton
NPER 0.5
Q 1750 company will purchase tons of steel after 6 months
Produce $175,000 steel rods
EachSteelRodWillCost $7 to manufacture
CompanyPlansToSellTheRodsFor $15 each
Treasury bills 4.5% continuously compounded
σ 38% of the returns(Price) on steel
E $1,400,000 Yield
S $1,137,500

d1 -0.5547
d2 -0.8234
N(d1) 0.2896
N(d2) 0.2051

C $48,556.65 Call price

C $48,556.65
P $279,908.38 Put price
This is the most the company should be willing to pay for the lease.
S1 $19,400,000 If the demand for the new filters is high
S1 $10,100,000 If the demand is low
S $14,100,000 The value of the project today
risk-free rate 7.00%
SalvageValue_E $11,900,000 company can sell the technology in one year
NPER 1

Value of put with high demand $0

Value of put with low demand $1,800,000
Percentage increase with high demand 37.59% ReturnRise
Percentage decrease with low demand -28.37% ReturnFall

ProbabilityRise 53.62%
ProbabilityFall 46.38%

Value of option to abandon $780,162.80 Put price (Pay for right to sell new technology at $11,900,000 after o
chnology at $11,900,000 after one year)
S $76 Case Stock price Put price
σ 60% A $76.00 $14.14
E $80 European put option B $90.37 $4.30
R 5% per year D $107.46 $0.00
NPER 2 months C $63.91 $22.63
F $53.75 $35.26
u 1.1891 E $76.00 $8.00
d 0.8410

ΔIncreasePrice 18.91%
ΔDecreasePrice -15.90%
Monthly interest rate 0.42%
Monthly interest rate 0.42%
Probability of rise 46.89%
Probability of decrease 53.11%
Put Value Put Value
$9.32 $9.50
$2.12
$0.00
$15.75 $16
$26.25
$4.00
E $57,000,000 Case
S $55,000,000 n=0 A
S1_NPER_6 $900,000 will be made to the owners n=1(Up) B
S1_NPER_12 $900,000 will be made to the owners n=2(Up+Up) D
σ 30% on price of of the building n=1(Down) C
R 6% per year n=2(Down+Up) F
n 2 n=2(Up+Down) E
n=2(Down+Down) G
u 1.2363
d 0.8089

ΔUpPrice 23.63%
ΔDownPrice -19.11%

SixMonthInterestRate 3%
SixMonthInterestRate 3%
ProbabilityOfRise 51.73%
ProbabilityOfDecrease 48.27%
Stock price Call price Call price
$55,000,000 $6,961,860 $6,547,526
$67,097,111 $13,860,524 $13,035,617 $10,997,111
$82,952,904 $27,595,230 $25,952,904
$43,587,184 $0 $0.00
$53,887,320 $0 $0.00
$54,272,028 $0 $0.00
$35,255,838 $0 $0.00