Use the spreadsheet on options pricing available through: www.mhhe.com/bkm

Click on our text, go to Student Edition, Chapter 21, Excel Templates/Black Scoles option pricing model.

Using this model, please answer the following questions:

Assume I want to find the value of a call option, given the following:

Current stock price is $80

Standard deviation of the underlying stock return distribution is .25

Six months to expiration for the option

Tbill rate is currently at .04

If the exercise price on the option is for $85, what should I be willing to pay for the call?

$6.41

up to $80

$7.56

$4.24

None of the above