A stock currently trades for $120 per share. Call options on the stock are available with a strike price of $125. The options expire in one month. The annualized risk free rate is 3%, and the expected volatility (annual) for the stock is 35%. Use the Black-Scholes option pricing model to calculate the price of the call option.

A stock currently trades for $120 per share. Call options on the stock are available with a strike price of $125. The options expire in one month. The annualized risk free rate is 3%, and the expected volatility (annual) for the stock is 35%. Use the Black-Scholes option pricing model to calculate the price of the call option.

EBK CONTEMPORARY FINANCIAL MANAGEMENT

14th Edition

ISBN:9781337514835

Author:MOYER

Publisher:MOYER

Chapter20: Financing With Derivatives

Section20.A: The Black-scholes Option Pricing Model

Problem 1P

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