Shares of Scruggs Inc. are currently trading at $27 with the volatility of returns of 22% per annum. The annual continuously compounded risk-free rate of interest is 2%.

a) Scruggs Inc. features in the FLATT500 stock index, which pays a continuous dividend yield of 1.2%, has a contract multiplier of $100 per full index point and volatility of returns of 20% per annum. Calculate the price of a five-month at-the-money European-style call option when the index is at 2,500 points and interpret your findings.