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 Black-Scholes formula for a call option is C = S0 * N(d1) - X * e^(-rT) * N(d2). Plugging in the values: C = 48 * 0.718891 - 45 * e^(-0.05*0.75) * 0.641713, which calculates to approximately €6.69.

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