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A non-dividend paying stock follows the Black-Scholes framework. The continuously-compounded expected return on the stock is 15%. The price of the stock is 80. The
A non-dividend paying stock follows the Black-Scholes framework.
- The continuously-compounded expected return on the stock is 15%.
- The price of the stock is 80.
- The Sharpe ratio is 0.35
- Annual volatility is 30%.
Calculate the price of a European at-the-money call option on the stock with two years to expiry.
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