# Question: Let S 120 K 100 30

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

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 price as T →∞?

b. Set r = 0.001. Repeat (a). Now what happens? 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 price as T →∞?

b. Set r = 0.001. Repeat (a). Now what happens? What accounts for the difference?

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