Lissa Co.'s stock price is currently $30.25.A 6-month call option on Lissa's stock has a strike price of $25 and has an expected volatility of 40% (i.e.,expected standard deviation = 40%).The risk-free rate is 6%.According to the Black-Scholes option pricing model,what is the value of the option?
A)$5.06
B)$5.62
C)$6.24
D)$6.94
E)$7.63

Question

Quizplus · Accepted Answer

The Black-Scholes model calculates the call option price using the current stock price, strike price, time to expiration, risk-free rate, and volatility. Given these inputs, the calculated option value is approximately $6.94.

Lissa Co'S Stock Price Is Currently $30