You own one call option with an exercise price of €30 on Nadia Interiors.This is currently selling for €27.80 a share but is expected to increase to either €28 or €34 a share over the next year.The risk-free rate of return is 5% and the inflation rate is 3%.What is the current value of your option if it expires in one year?

Question

Quizplus · Accepted Answer

The correct answer is A because the current value of the option is €0.76. This is calculated using the Black-Scholes model, which takes into account the current stock price, the exercise price, the time to expiration, the risk-free rate, and the volatility of the stock.

You Own One Call Option with an Exercise Price of €30