Assume that you have been given the following information on Purcell Corporation's call options: InputsIntermediate CalculationsCurrent stock price = $12d1 = 0.32863Time to maturity of option = 9 monthsd2 = 0.05477Variance of stock return = 0.10N(d1) = 0.62878Strike price of option = $12N(d2) = 0.52184Risk-free rate = 7% According to the Black-Scholes option pricing model, what is the option's value? Do not round intermediate calculations. Round your answer to the nearest cent. Use only the values provided in the problem statement for your calculations.$

Spot price(S)=$12 Strike price(X)=$12 Risk free rate(r)=7% Time period=9 months The time period in…

Answered: Assume that you have been given the…

Financial Management: Theory & Practice

16th Edition

ISBN:9781337909730

Author:Brigham

Publisher:Brigham

Chapter8: Financial Options And Applications In Corporate Finance

Section: Chapter Questions

Problem 5MC: In 1973, Fischer Black and Myron Scholes developed the Black-Scholes option pricing model (OPM). (1)...

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Assume that you have been given the following information on Purcell Corporation's call options:

Inputs	Intermediate Calculations
Current stock price = $12	d₁ = 0.32863
Time to maturity of option = 9 months	d₂ = 0.05477
Variance of stock return = 0.10	N(d₁) = 0.62878
Strike price of option = $12	N(d₂) = 0.52184
Risk-free rate = 7%

According to the Black-Scholes option pricing model, what is the option's value? Do not round intermediate calculations. Round your answer to the nearest cent. Use only the values provided in the problem statement for your calculations.

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