## Question

# The Black Sheep Inc.'s call option has the following characteristics: Exercise price of The Black Sheep Inc.'s call option ($) 75 Annualized risk-free rate 4.5%

The Black Sheep Inc.'s call option has the following characteristics:

Exercise price of The Black Sheep Inc.'s call option ($) | 75 |

Annualized risk-free rate | 4.5% |

Time to the expiration of the options (years) | 0.75 |

Standard deviation of the annual stock returns for The Black Sheep Inc.'s stock | 0.45 |

Per-share price for The Black Sheep Inc.'s stock ($) | 90 |

The current value of this call option is $23.1469 dollars, according to the Black-Scholes option pricing formula. What is:

Time value premium

For a put option with the same characteristics as above, the time value premium

## Step by Step Solution

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### Step: 1

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### Quantitative Methods For Business

**Authors:** David Anderson, Dennis Sweeney, Thomas Williams, Jeffrey Cam

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