This valuation theory was developed in the 1970's and is very widely used by traders and hedge funds. Scholes and Merton received the 1997 Nobel Prize in Economics for developing this theory (Black was deceased by 1997). Problem 4 A stock price is currently at $42. The risk-free annual interest rate is 10%. The stock has an annualized volatility of 20%. Find the Black/Scholes/Merton valuation of a European call option to purchase the stock in 6 months at a strike price of $40