Question: A replicating portfolio for a call option is defined as C=S+B. For the Black-Scholes model, =N(d1) and B=PV(K)N(d2). Assume a European call option on a

A replicating portfolio for a call option is defined as C=S+B. For the Black-Scholes model, =N(d1) and B=PV(K)N(d2).

Assume a European call option on a stock that pays no dividends and has a current stock price of $125 per share. The option's strike price is $98 with expiration period T=0.25, the stock's return has a volatility of 40% and the risk-free rate is 6.18%.

Answer: The portfolio that is _________ (fill in "short" or "long") shares of the stock ____________(round to three decimals) and _________ (fill in "short" or "long") an amount of $ _________ (round to two decimals) of the risk-free bond/loan has the same value as this call option.

The value of the replicating portfolio is $ _________. (round to two decimals)

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