(Solution Document) Assume the following information for a stock and a call option written on the st


7. Assume the following information for a stock and a call option written on the stock:     

Exercise price = K40

Current stock price= 30

The variance (?2) .25 0r 25%

Time to expiration, .25year or a quarter

Risk free rate of return= 5% per annum

Answer the below questions

Use the Black-Scholes procedure to determine the value of the call option

Change the time to expiration, t, to 0.5 or six month and compute the call value again

 







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