Question: Consider a Merton-Black-Scholes model with r = 0.07, = 0.3, T = 0.5 years, S(0) = 100, and a call option with the strike

Consider a Merton-Black-Scholes model with r = 0.07, σ = 0.3, T = 0.5 years, S(0) = 100, and a call option with the K = 100. Using the normal table (or an appropriate software program), find the price of the call option, when there are no dividends. Repeat this exercise when (a) the rate is 3%, (b) the of $3.00 is paid after three months.

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With no dividends we get d 1 02711 d 2 00589 Nd 1 06068 Nd 2 05235 C ... View full answer

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