The Black-scholes formula for European options on non-dividend paying stocks is: c = S_0 N(d_1) - K e^-rT N(d_2) p = K e^-rT N(-d_2) - S_0 N(-d_1) where d_1 = ln(S_0/K) + (r + sigma^2/2)T/sigma squareroot T d_2 = ln(S_0/K) + (r - sigma^2/2)T/sigma squareroot T = d_1 - sigma squareroot T Given the following: s_0 = 50 k = 55 T =.5 (i.e. 6 months) r =.05 (i.e. 5%) sigma =.25(i.e. 25% annual volatility) What are each of the following: ln(S_0/K) = sigma^2 = e^-rt = (as a check, this should be approximately equal to 1/(1.05)^5) d_1 = d_2 = If you have each of the above, you have enough to calculate c and p, using the N(x) tables on page 591 and 592. They are also loaded in the content page on BB. You can also use the option calculator to check the answer, but remember: On the test you will not have access to the option calculator, so you need to familiarize yourself with the log tables. N(d1)= N(d2)= What are c and p for 6-month European options on this non-dividend paying stock with strike price of $55/share