Question: Assume the Black-Scholes framework. You are given: (i) The current price of a nondividend-paying stock is 80. (ii) An investor has sold 1,000 units of

Assume the Black-Scholes framework. You are given:

(i) The current price of a nondividend-paying stock is 80.

(ii) An investor has sold 1,000 units of a one-year at-the-money European call option on the stock. He immediately delta-hedges the commitment with 750 shares of the stock.

(iii) The continuously compounded risk-free interest rate is 7%.

(iv) The volatility of the stock is less than 100%.

Calculate the price of each call option.

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