As a finance manager in a company, you considering purchasing a call option on the stock of Crude Oil Company. Currently Crude Oil Company stock trades for $700 per share, and you predict that its price will be either $500 or $1000 in one year. The call option would enable you to buy a share of Crude Oil Company stock in one year for $600.

What is this option worth if the risk-free rate is 5%?

Answer rating: 100% (QA)

To calculate the value of the call option we can use the BlackScholes formula which takes into accou... View the full answer