5-5: The Black-Scholes Option Pricing Model (OPM)

Problem 5-3 Black-Scholes Model

Assume that you have been given the following information on Purcell Industries:

Current stock price = $15	Strike price of option = $14
Time to maturity of option = 6 months	Risk-free rate = 8%
Variance of stock return = 0.11
d1 = 0.582008	N(d1) = 0.719719
d2 = 0.347487	N(d2) = 0.635887

According to the Black-Scholes option pricing model, what is the option's value? Round your answer to the nearest cent.