hard · Principles of Finance time-value-of-money
An analyst is valuing a European call option with the following parameters: current stock price S = 100, strike price K = 105, time to expiration T = 0.5 years, continuously compounded risk-free rate r = 4%, and annualized volatility σ = 25%.
Using the Black-Scholes-Merton model, where d_1 = -0.0744, d_2 = -0.2512, N(d_1) = 0.4704, and N(d_2) = 0.4009, what is the estimated call price?
- $4.92
- $5.78
- $8.70
- $7.14
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