You think the intrinsic value of Biogen Pharmaceuticals stock is somewhere around $300 a share. At the same time, you see they only trade at $250 a share on the NASDAQ market. $250 is more money than you want to risk. As a result, you decide the buy a call option instead. Since the company is on the hunt for a vaccine against SARS-Cov-2, the realized volatility on the company stock is high at 35% but the implied volatility is even higher at 40%.

You have decided to select a 6-month option with a strike price of $260. Biogen pays a dividend of $3.75 a share and T-Bills pay a tiny yield of just 0.2%

1) Estimate the market value of the call option.

2) What is the break-even price? (This is the price at which you can sell the option at expiration and break even.)