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You Have Been Provided with the Following Information \bullet S = $25

Question 53

Essay

You have been provided with the following information:
\bullet S = $25
\bullet Exercise price = $20
\bullet Risk-free rate = 1%
\bullet Volatility is 20%
\bullet The option expires in one year.
Based on this information, what is the value of the corresponding call option?
(NOTE: if using the appendix A-1 to solve for the N(d1)and N(d2)values you should truncate d1 and d2 to two decimal places and round down.

Correct Answer:

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Applying the Black-Scholes Model
d1...

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