# Question: Let S 100 K 120 30

Let S = $100, K = $120, σ = 30%, r = 0.08, and δ = 0.

a. Compute the Black-Scholes call price for 1 year to maturity and for a variety of very long times to maturity. What happens to the option price as T →∞?

b. Set δ = 0.001. Repeat (a). Now what happens to the option price? What accounts for the difference?

a. Compute the Black-Scholes call price for 1 year to maturity and for a variety of very long times to maturity. What happens to the option price as T →∞?

b. Set δ = 0.001. Repeat (a). Now what happens to the option price? What accounts for the difference?

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