An analyst is interested in using the Black-Scholes model to value call options on the stock of Ledbetter Inc. The analyst has accumulated the following information:

The price of the stock is $50.

The strike price is $45.

The option matures in 3 months (t =0.25)

The variance is 0.20

The risk-free rate is 5 percent

Given this information, the analyst is then able to calculate some other necessary components of the Black-Scholes model:

N(d1) = 0.8904

N(d2) = 0.8705

N(d1) and N(d2) represent areas under a standard normal distribution function. Using the Black-Scholes model, what is the value of the call option?

Question 8 options:

	$4.84
	$6.55
	$5.84
	$7.11
	$5.98