Question: You have been asked by a client to determine the maximum price he should be willing to pay to purchase a Combred call. The options

You have been asked by a client to determine the maximum price he should be willing to pay to purchase a Combred call. The options have an exercise price of $45 and they expire in 156 days. The current price of Combred stock is $44 3/8, the annual risk free rate is 7 percent and the estimated variance of the stock is 0.0961. No dividends are expected to be declared over the next six months. What is maximum price your client should pay?

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