The current stock price of Howard & Howard is $64, and the stock does not pay dividends. The instantaneous risk-free rate of return is 5%. The instantaneous standard deviation of H&H's stock is 20%. You want to purchase a call option on this stock with an exercise price of $55 and an expiration date 73 days from now.
Using the Black-Scholes OPM, the call option should be worth ________ today.
A) $0.01
B) $0.08
C) $9.26
D) $9.62

Question

Quizplus · Accepted Answer

d₁ = 11eaaae8_8b44_38aa_a4b8_4593ac5c315f_TB6474_11 = 1.851 d₂ = 1.851 - 0.20 × 11eaaae8_8b44_38ab_a4b8_abab02c919bb_TB6474_11 = 1.762 N(d₁) = 0.968 N(d₂) = 0.961 Call value = S0N(d₁) - Xe-rtN(d₂) = (64)(0.968) - (55)e-(0.05)(0.2)(0.961) = $9.62

The Current Stock Price of Howard & Howard Is $64