compare the price on July 24, 2009 (image below), of the following options on JetBlue stock to the price predicted by the Black-Scholes formula. Assume that the standard deviation of JetBlue stock is 65 % per year and that the short-term risk-free rate of interest is 1.2 % per year.

a. December 2009 call option with a $ 5.00 strike price.

b. December 2009 put option with a $ 6.00 strike price.

c. March 2010 put option with a $ 7.00 strike price.

a. December 2009 call option with a $ 5.00 strike price.

The December contract expires on the Saturday (December 19) following the third Friday of December; there are 148 days left until expiration.

The price of the call according to the Black-Scholes formula is $

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ABLE 21.1 JetBlue Option Quotes JBLU 5.03 +0.11 Jul 24 2009 @ 17:17 ET Bid 5.03 Ask 5.04 Size 168 x 96 Vol 7335887 Calls Bid Ask Vol Open Int Puts Bid Ask Vol Open Int 09 Dec 5.00 (JGQ LA) 0.80 0.90 47 5865 09 Dec 5.00 (JGQ XA) 0.80 0.90 6 1000 09 Dec 6.00 (JGQ LF) 0.45 0.55 2 259 09 Dec 6.00 (JGQ XF) 1.40 1.50 0 84 10 Jan 5.00 (JGQ AA) 0.85 1.00 125 6433 10 Jan 5.00 (JGQ MA) 0.85 0.95 10 14737 10 Jan 6.00 (JGQ AF) 0.50 0.60 28 0 10 Jan 6.00 (JGQ MF) 1.45 1.55 22 10 Jan 9.00 (JGQ AD) 0.05 0.15 0 818 10 Jan 9.00 (JGQ MD) 4.00 4.10 0 0 10 Mar 5.00 (JGQ CA) 1.05 1.15 O 50 10 Mar 5.00 (JGQ OA) 1.00 1.10 40 10 Mar 6.00 (JGQ CF) 0.65 0.75 146 10 Mar 6.00 (JGQ OF) 1.60 1.70 10 41 10 Mar 700 (JGQ CG) 0.40 0.50 5 3 10 Mar 700 (JGQ OG) 2.30 2.45 10 0