Question
You have a 1-year call option for which the underlying asset is one barrel of oil. The exercise price is $45 per barrel.Suppose that investors
You have a 1-year call option for which the underlying asset is one barrel of oil. The exercise price is $45 per barrel.Suppose that investors believe that the annual standard deviation of oil prices is 30%. Annual risk free rate is 5% and the current oil price per barrel is $40. What is the call option price?
a.$3.66
b.$9.17
c.$2.08
d.$5.69
e.$12.00
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Contemporary Financial Management
Authors: R. Charles Moyer, James R. McGuigan, Ramesh P. Rao
13th edition
1285198840, 978-1285198842
