Assume the Black-Scholes framework. For a dividend-paying stock and a European option on the stock, you are given the following information:

The current stock price is $58.96.

The strike price of the option is $60.00.

The expected annual return on the stock is 10%.

The volatility is 20%.

The continuously compounded risk-free rate is 6%.

The continuously dividend yield is 5%.

The expiration time is three months. (.25)

Calculate the price of the call.[answer:$1.926]

using:

C(St , K, , r, T t, ) = Ste (T t)N(d1) Ker(T t)N(d2) where

d1 = [ln (S_t/K) + (r + 0.5 ² )(T t)]/ [ T t] and

d2 = [ln (S_t/K) + (r 0.5 ² )(T t)]/ [ T t] = d1 T t.