Ima Greedy, the CFO of Financial Saving Techniques has been granted options on 200,000 shares. The equity is currently trading at £22 a share and the options are at the money.The volatility of the
Equity has been about .20 on an annual basis over the last several years.The option mature in 3
Years and the risk free rate is 4%.
What is the value of a call option?
A)£4.14
B)£4.86
C)£7.57
D)£5.62
E)£6.16

Question

Quizplus · Accepted Answer

The value of a call option can be calculated using the Black-Scholes model. Given the parameters: current stock price (£22), strike price (£22, since options are at the money), time to maturity (3 years), volatility (0.20), and risk-free rate (4%), the calculated call option value is approximately £7.57.

Ima Greedy, the CFO of Financial Saving Techniques Has Been