Let us assume that an investor bought a call option on Beximco

company shares at an exercise price of $110$p six months ago, for a

premium of $10p$ and it will take six months to mature. The current

market price of Beximco shares is $135$ p and the pure interest rate

paid on government bond is $11\%.$ The volatility of Beximco share

and market index as measured by the standard deviation $()$

respectively are $25\%$ & $23\mathrm{.}5\%.$ Moreover, Beximco company is

expected to pay $15$ p div per share in six months' time $($Beximco

options are due to expire in six months$).$

$=$ Calculate: $($a$)$ The intrinsic value of the call.; $($b$)$ The market

value of the option using Black$-$Scholes model.; and $($c$)$ The time

$($gamble$)$ value of option.