? The price of the stock is $40.
? The strike price of the option is $40.
? The option matures in 3 months (t = 0.25).
? The standard deviation of the stock's returns is 0.40, and the variance is 0.16.
? The risk-free rate is 6%.
Given this information, the analyst then calculated the following necessary components of the Black-
? d1 = 0.175
? d2 = -0.025
? N(d1) = 0.56946
? N(d2) = 0.49003
N(d1) and N(d2) represent areas under a standard normal distribution function. Using the Black-
Scholes model, what is the value of the call option?
C = S*N(d1) - K*exp(-rt)*N(d2)
S =Stock ...
An analyst wants to use the Black-Scholes model to value call options on the stock of Ledbetter Inc. based on the following data: