The Black-Scholes option pricing model

The BlackScholes option pricing model (OPM) was developed in 1973. The creation of the BlackScholes OPM played a significant role in the rapid growth of options trading.

Under the assumptions used by Fischer Black and Myron Scholes to derive the BlackScholes model, if the option price is (the same as or different from) the price found using the BlackScholes model, arbitrage opportunities will exist.

According to the BlackScholes Option Pricing Model, if the exercise price, X, increases, the value of the call option (decrease or increase) .

Purple Pigeon Bird Seed Company has a current stock price of $17.00. A call option on this stock has an exercise price of $17.00 and 0.49 year to maturity. The variance of the stock price is 0.09, and the risk-free rate is 6%. You calculate d to be 0.25 and N(0.25) to be 0.5987. Therefore, d will be 0.04 and N(0.04) will be 0.5160. Using the BlackScholes Option Pricing Model, what is the value of the option? (Note: Use 2.7183 as the approximate value of e.)

$1.494

$1.328

$1.660

$1.909