Question

Asked Nov 27, 2019

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Question 2. (a) Use the Black-Scholes formula to find the current price of a European call option on a stock paying no income with strike 60 and maturity 18 months from now. Assume the current stock price is 50, the lognormal volatility of the stock is σ = 20%, and the constant continuously compounded interest rate is r = 10%.

Step 1

**Calculation of Price of European Call Option:**

The price of European call option is **$4.18**.

**Excel Spreadsheet:**

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