Targezept Bionics, Inc., has a common stock outstanding that sells for $21 per share. A call option

Question:

Targezept Bionics, Inc., has a outstanding that sells for $21 per share. A call option on the stock has an exercise price of $20 and will expire in three months. Based on an analysis of the stock’s past volatility, you have estimated the standard deviation of returns to be 0.6. The short-term interest rate is now 5 percent and you expect that to remain constant over the next six months. Use the Black-Scholes option pricing model to estimate the value of this option.

Common Stock
Common stock is an equity component that represents the worth of stock owned by the shareholders of the company. The common stock represents the par value of the shares outstanding at a balance sheet date. Public companies can trade their stocks on...