What is the value of a 9-month call with a strike price of €45 given the Black-Scholes Option Pricing Model and the following information?
Share price €48
Exercise price €45
Time to expiration .75
Risk-free rate .05
N(d1) .718891
N(d2) .641713

Question

Quizplus · Accepted Answer

The value of a call option using the Black-Scholes Model is calculated using the formula: C = S0*N(d1) - X*e^(-rt)*N(d2), where C is the call option price, S0 is the current stock price, N(d1) and N(d2) are values from the cumulative normal distribution function, X is the strike price, r is the risk-free interest rate, and t is the time to expiration in years. Plugging in the given values: C = 48*N(0.718891) - 45*e^(-0.05*0.75)*N(0.641713) = 48*0.718891 - 45*e^(-0.0375)*0.641713 = 34.507168 - 27.818 = €6.69.

What Is the Value of a 9-Month Call with a Strike