PART 1 The current price of a non-dividend-paying stock is $310 and the annual standard deviation of the rate of return on the stock is 30%. A European call option on the stock has a strike price of $250 and expires in 0.25 years. The risk-free rate is 2% (continuously compounded).

1.What is the value of N(d₁) in the Black-Scholes formula? Use Excel's NORM.S.DIST(d₁, true) function.

2.What is the value of N(d₂)?

PART 2 The current price of a non-dividend-paying stock is $682 and the annual standard deviation of the rate of return on the stock is 46%. A European call option on the stock has a strike price of $630 and expires in 0.5 years. The risk-free rate is 4% (continuously compounded).

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

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