CHAPTER 5: OPTION PRICING MODELS: THE BLACK-SCHOLES-MERTON MODEL

MULTIPLE CHOICE TEST QUESTIONS

The following information is given about options on the stock of a certain company.

S₀ = 23 X = 20

r_c = 0.09 T = 0.5

s² = 0.15

No dividends are expected.

Use this information to answer questions 1 through 8.

1. What value does the Black-Scholes-Merton model predict for the call? (Due to differences in rounding your calculations may be slightly different.