BlackScholes Xstrata plc is currently priced at 10.52. A call option with an expiration of 6 months

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Black—Scholes Xstrata plc is currently priced at £10.52.

A call option with an expiration of 6 months has an exercise price of £9.00. The risk-free rate is 3 per cent per year, compounded continuously, and the standard deviation of the equity’s return is infinitely large. What is the price of the call option?

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Fundamentals Of Corporate Finance

ISBN: 9780077178239

3rd Edition

Authors: David Hillier, Iain Clacher, Stephen A. Ross

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