Suppose that the spread between the yield on a three-year riskless zero-coupon bond and a three-year zero-coupon

Question:

Suppose that the spread between the yield on a three-year riskless zero-coupon bond and a three-year zero-coupon bond issued by a bank is 210 basis points. The Black-Scholes–Merton price of an option is $4.10. How much should you be prepared to pay for it if you buy it from a bank?
Fantastic news! We've Found the answer you've been seeking!

Step by Step Answer:

Question Posted: