# Calculating the Value of Option

Black-Scholes Model

Assume that you have been given the following information on Purcell Industries:

Current stock price = $18 Strike price of option = $13

Time to maturity of option = 4 months Risk-free rate = 5%

Variance of stock return = 0.13

d1 = 1.747426 N(d1) = 0.959718

d2 = 1.539259 N(d2) = 0.93813

According to the Black-Scholes option pricing model, what is the option's value? Round your answer to the nearest cent.

$_____

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#### Solution Preview

Solution:

Current Price of stock=S= 18

Strike price of option=K= 13

Risk free rate=r= 5%

Time remaining ...

#### Solution Summary

This solution depicts the steps to estimate the value of a option- the full solution is clearly presented in an Excel file.

$2.19