A Call Option Is the Right to Buy Stock at $25

question 19

Essay

A call option is the right to buy stock at $25 a share. According to the Black/Scholes option valuation model, what is the value of the call
a. if the price of the stock is $25, the interest rate is 8 percent, the option expires in three months, and the standard deviation of the stock's return is 0.20 (20 percent)?
b. if the price of the stock is $25, the interest rate is 6 percent, the option expires in three months, and the standard deviation of the stock's return is 0.20 (20 percent)?
c. if the price of the stock is $27, the interest rate is 8 percent, the option expires in three months, and the standard deviation of the stock's return is 0.20 (20 percent)?

---

Definitions:

Wii U

A home video game console developed by Nintendo, known for its unique gamepad and a blend of handheld and console gaming features.

Value-Based Pricing Strategy

A pricing strategy where the price is set based on the perceived value of a product or service to the customer rather than on the cost of the product or competitive prices.

Market Share

The portion of a market controlled by a particular company or product.

Clients Acquisition

The process of gaining new clients or customers for a business through various strategies and efforts.