Using the implied volatility you calculated in Problem 14, and the information in that problem, use the Black-Scholes option pricing formula to calculate the value of the 800 January 2014 call option.

Problem 14

Using the market data in Figure 20.10 and a risk-free rate of 0.25% per annum, calculate the implied volatility of Google stock in September 2012, using the bid price of the 700 January 2014 call option. 

Figure 20.10

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FIGURE 20.10 GOOG (GOOGLE INC) Sep 10 2012 @ 21:39 ET Calls Google Call Option Quotes and Implied Debt Yields 14 Jan 300.00 (GOOG1418A300-E) 14 Jan 350.00 (GOOG1418A350-E) 14 Jan 400,00 (GOOG1418A400-E) 14 Jan 450.00 (GOOG1418A450-E) 14 Jan 500.00 (GOOG1418A500-E) 14 Jan 550.00 (GOOG1418A550-E) 14 Jan 600.00 (GOOG1418A600-E) 14 Jan 650.00 (GOOG1418A650-E) 14 Jan 660.00 (GOOG1418A660-E) 14 Jan 680.00 (GOOG1418A680-E) 14 Jan 700.00 (GOOG1418A700-E) 14 Jan 750.00 (GOOG1418A750-E) Bid 700.77 - 5.38 Vol 2560067 Open Ask Int 402.90 405.90 4 358.00 34 311.60 471 355.30 308.20 263.00 220.20 181.00 266.50 25 223.90 229 184.70 122 145.20 148.60 303 114.30 117.30 292 108.50 111.60 63 97.80 101.70 87.60 91.00 91 508 66.20 68.10 534 Debt Yield 12% 10% 8% 6% 4% 2% 0% T 100 140 120 160 180 Amount Borrowed ($ Billion) 200