Question: Consider a forward start option which, 1 year from today, will give its owner a 1-year European call option with a strike price equal to

Consider a forward start option which, 1 year from today, will give its owner a 1-year European call option with a strike price equal to the stock price at that time. You are given:

1)The European call option is on a stock that pays no dividends

2)The stock's volatility is 30%

3)The forward price for delivery of 1 share of the stock 1 year from today is 100

5)The continuously compounded risk-free interest rate is 8%.

Required: Under the Black- Scholes framework, determine the price today of the forward start option.

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