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Use the Black-Scholes model to find the price for a call option with the following inputs:...

Use the Black-Scholes model to find the price for a call option with the following inputs: (1) current stock price is $30, (2) strike price is $37, (3) time to expiration is 6 months, (4) annualized risk-free rate is 6%, and (5) variance of stock return is 0.36. Do not round intermediate calculations. Round your answer to the nearest cent.

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Answer #1

Entering the values in Black-Scholes excel calculator (You can get the calculator online):

Annualized Volatility = square root of variance = sqrt(0.36) = 0.6 = 60%

Call option price : $ 3.06

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