Sam is interested in buying European call options of Ramsay Ltd. The current share price is $68.5, exercise price is $65, continuously compounded risk-free rate is 4%, option expires in 110 days, and the volatility (squared deviation) is 38%. Using Black-Scholes model, calculate the price of a European call option on the shares of Ramsay Ltd. Formulae Black-Scholes Option Pricing Model Call Option: c = SN[d] - Xe N[d] Where, d = Inl+r+r OVT d = d - oT Z Table: Negative Values Z Table Body of table gives area under Z curve to the left of z. Example: P[Z < -2.63] = .0043 z .00 .01 .02 .03 .05 .06 .07 .08 .09 .04 .0001 .0001 .0001 .0001 .0001 .0001 .0001 .0001 .0001 .0001 .0001 .0001 .0001 .0001 .0001 .0001 .0001 .0001 .0001 .0001 .0002 .0002 .0002 .0002 .0003 .0003 .0003 .0003 .0002 .0004 .0003 -3.80 .0001 .0001 .0001 -3.70 .0001 .0001 .0001 -3.60 .0002 .0002 .0001 .0001 -3.50 .0002 .0002 .0002 .0002 .0002 .0002 -3.40 .0003 .0003 .0003 .0003 .0003 -3.30 .0005 .0005 .0005 .0004 .0004 .0004 .0004 .0004 -3.20 .0007 .0007 .0006 .0006 .0006 .0006 .0006 .0005 .0005 .0005 -3.10 .0010 .0009 .0009 .0009 .0008 .0008 .0008 .0008 .0007 .0007 -3.00 .0013 .0013 .0013 .0012 .0012 .0011.0010 .0010 -2.90 .0019 .0018 .0018 .0017 .0016 .0016 .0015 .0015 .0014 .0014 -2.80 .0026 .0025 .0024 .0023 .0023 .0022 .0021 .0021 .0020 .0019 -2.70 .0035 .0034 .0033 .0032 .0031 .0030 .0029 .0028 .0027 .0026 -2.60 .0047 .0045 .0044 .0043 .0041 .0040 .0039 .0038 .0037 .0036 -2.50 .0062 .0060 .0059 .0057 .0055 .0052 .0051 .0049 .0048 -2.40 .0082 .0080 .0078 .0075 .0073 .0068 .0066 .0064 -2.30 .0107 . 0104 .0102 .0099 .0096 -2.20 .0139 . 0136 .0132 .0129 .0125 -2.10 .0179 .0174 .0054 .0071 .0069 .0094 .0091 .0089 .0087 .0084 .0122 .0119 .0116 .0113 .0110 .0170 .0166 .0162 .0150 .0146 .0143 -2.00 .0228 .0222 .0217 .0212 .0207 .0192 .0188 .0183 -1.90 .0287 .0281 .0274 .0268 .0262 -1.80 .0359 .0351 .0344 .0250 .0244 .0239 .0233 .0294 .0336 .0329 .0307 .0301 .0418 .0409 -1.70 .0446 .0436 .0427 -1.60 .0548 .0537 .0526 .0516 .0384 .0375 .0367 .0475 .0465 .0455 .0011.0011 .0158 .0154 .0202 .0197 .0256 .0322 .0314 .0401 .0392 .0505 .0495 .0485 -1.60 .0548 -1.50 . 0668 .0630 .0537 .0526 .0516 .0505 .0495 .0485 .0475 .0465 .0455 .0655 .0643 .0618 .0606 .0594 .0582 .0571 .0559 .0749 .0735 .0721 .0708 .0694 .0901 .0853 .1020 .1003 .0764 .0681 . 0918 -1.40 .0808 .0793 . 0778 -1.30 .0968 .0951 .0934 -1.20 . 1151 .1131 .1112 -1.10 .1357 .1335 .1314 .0885 .0869 .0838 .0823 .1093 .1075 .1056 . 1038 .0985 .1292 .1271 .1251 . 1230 .1170 -1.00 .1587 . 1562 .1539 .1515 .1492 .1469 .1446 .1379 .1788 .1762 .1736 .1711 . 1685 . 1611 .2061 .2033 .2005 .1977 . 1867 -0.90 .1841 . 1814 -0.80 .2119 .2090 . 1949 -0.70 .2420 .2389 .2358 .2327 .2296 .2266 .2236 -0.60 .2743 .2709 .2676 .2643 .2611 .2578 -0.50 .3085 .3050 .3015 .2981 .2946 .2912 -0.40 .3446 .3409 .3372 .3336 .3300 .3264 -0.30 .3821 .3783 .3745 -0.20 .4207 . 4168 .4129 -0.10 .4602 .4562 0.00 .3707 .3669 .3632 -4090 .4052 .4013 .4404 .4522 .4483 .4443 - 5000 .4960 .4920 . 4880 .4840 - 4801 .1210 .1190 .1423 .1401 . 1660 .1635 .1922 .1894 .2206 .2177 .2546 .2514 .2483 2843 .2810 .3192 .3156 .3520 .2877 .3228 .3594 .3557 .3974 . 4364 . 4761 .3936 .3897 .4325 .4286 .4721 . 4681 .2148 .2451 .2776 .3121 .3483 .3859 .4247 .4641 Example: P[Z