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Suppose that Bigco is currently trading for $100 per share. The stock has an annual volatility of 90 percent and does not pay any dividends.

Suppose that Bigco is currently trading for $100 per share. The stock has an annual volatility of 90 percent and does not pay any dividends. The riskless interest rate is 5 percent.

(a) What is the value of a European call option with a strike price of $100 and expiration in 10 years?

(b) What is the value of a RE call option with a strike price of $100 and an expected holding period of 10 years?

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