Xstrata plc is currently priced at 10.52. A call option with an expiration of 6 months has

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Xstrata plc is currently priced at £10.52. A call option with an expiration of 6 months has an exercise price of £9.00. The risk-free rate is 3 per cent per year, compounded continuously, and the standard deviation of the equity’s return is infinitely large.

What is the price of the call option?

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Corporate Finance

ISBN: 9780077173630

3rd Edition

Authors: David Hillier, Stephen A. Ross, Randolph W. Westerfield, Bradford D. Jordan, Jeffrey F. Jaffe

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