You have been provided with the following information:
S = $25
Exercise price = $20
Risk-free rate = 1%
Volatility is 20%
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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