Problem 20:3

The common stock of the C.A.L.L. Corporation has been trading in a narrow range around $95 per share for months, and you believe it is going to stay in that range for the next 6 months. The price of a 6-month put option with an exercise price of $95 is $10.90.

a.

If the risk-free interest rate is 8% per year, what must be the price of a 6-month call option on C.A.L.L. stock at an exercise price of $95 if it is at the money? (The stock pays no dividends.) (Do not round intermediate calculations. Round your answer to 2 decimal places. Omit the "$" sign in your response.)

Price of a 6-month call option

$