Exhibit 22.3
Use the Information Below for the Following Problem(S)
A stock currently trades for $130 per share. Options on the stock are available with a strike price of $125. The options expire in 10 days. The risk free rate is 3% over this time period, and the expected volatility is 0.35.
-Refer to Exhibit 22.3.Use the Black-Scholes option pricing model to calculate the price of a call option.
A) $5.19
B) $4.35
C) $3.93
D) $6.19
E) $8.17

Question

Quizplus · Accepted Answer

Using the Black-Scholes model, the call option price is calculated using the given parameters: current stock price ($130), strike price ($125), time to expiration (10 days), risk-free rate (3%), and volatility (0.35). The calculated call option price is approximately $6.19.

Exhibit 22.3 Use the Information Below for the Following Problem(S)