Assume that you have been given the following information on Purcell Industries: Current stock price = $15

Question:

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

Current stock price = $15 ………………… Strike price of option = $15

Time to maturity of option = 6 …………… Months Risk-free rate = 6%

Variance of stock return = 0.12

d₁ = 0.24495 …………………… N(d₁) = 0.59675

d₂ = 0.00000 …………………… N(d₂) = 0.50000

According to the Black-Scholes option pricing model, what is the option’s value?

Strike Price
In finance, the strike price of an option is the fixed price at which the owner of the option can buy, or sell, the underlying security or commodity. Maturity
Maturity is the date on which the life of a transaction or financial instrument ends, after which it must either be renewed, or it will cease to exist. The term is commonly used for deposits, foreign exchange spot, and forward transactions, interest...