A call option written on a stock selling for $10 has an exercise price of $12. The
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A call option written on a stock selling for $10 has an exercise price of $12. The call expires in nine months. The stock's standard deviation of return is 30% per year and the risk-free interest rate is 1% per month.
a. What is the Black-Scholes price of the call?
b. What is the price if the call expires in 3 months? Why is it lower than the price you found in part (a)?
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a The Black Sch oles price of the call is 1 10 b Th...View the full answer
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Related Book For 
Fundamentals Of Corporate Finance
ISBN: 9781259087585
6th Canadian Edition
Authors: Stephen Ross, Randolph Westerfield, Bradford Jordan, Gordon Roberts
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