e. In 1973, Fischer Black and Myron Scholes developed the Black-Scholes Option Pricing Model (OPM).

1. What assumptions underlie the OPM?

e. 2. Write out the three equations that constitute the model.

3. What is the value of the following call option according to the OPM?

Stock Price = $27.00.

Strike Price = $25.00

Time To Expiration = 6 Months = 0.5 years.

Risk-Free Rate = 6.0%.

Stock Return Standard Deviation = 0.49.