The current stock price of National Paper is $69, and the stock does not pay dividends. The instantaneous risk-free rate of return is 10%. The instantaneous standard deviation of National Paper's stock is 25%. You want to purchase a call option on this stock with an exercise price of $70 and an expiration date 73 days from now.
Using the Black-Scholes OPM, the call option should be worth ________ today.
A) $2.50
B) $2.94
C) $3.26
D) $3.50

Question

Quizplus · Accepted Answer

d₁ = 11eaaae8_8b43_ea86_a4b8_2979b487171c_TB6474_11 = 0.1061 d₂ = 0.1061 - 0.25 × 11eaaae8_8b44_1197_a4b8_d1f18291119e_TB6474_11 = -0.0057 N(d₁) = 0.5422 N(d₂) = 0.5422 Call value = S0N(d1) - Xe-rT N(d₂) = 69 × 0.5422 - 70 × e-(0.1)(0.2) × 0.4977 = $3.26

The Current Stock Price of National Paper Is $69, and the Stock