Intro

The current price of a non$-$dividend$-$paying stock is $$34\mathrm{.}09$ and the annual standard deviation of the stock's return is $33\%.$ The risk$-$free rate is $2\mathrm{.}5\%($continuously compounded$).$

A European call option on the stock has a strike price of $$32$ and expires in $0\mathrm{.}7$ years.

A B

$1$ Inputs

$2$ Stock price $34\mathrm{.}09$

$3$ Exercise price $32$

$4$ Expiration $($years$)0\mathrm{.}7$

$5$ St$.$Dev. of returns $0\mathrm{.}33$

$6$ Dividend yield $0$

$7$ Risk$-$free rate $0\mathrm{.}025$

Attempt $1/50$ for $10$ pts$.$

Part $1$

What should be the price $($premium$)$ of the call option?