USE THE INFORMATION BELOW FOR THE FOLLOWING PROBLEM(S)

question 108

Multiple Choice

USE THE INFORMATION BELOW FOR THE FOLLOWING PROBLEM(S)
A stock currently trades for $130 per share. Options on the stock are available with a strike price of $125. The options expire in 10 days. The risk-free rate is 3 three over this time period, and the expected volatility is 0.35.
-Refer to Exhibit 16.3. Use the Black-Scholes option pricing model to calculate the price of a call option.

• A) $5.19
• B) $4.35
• C) $3.93
• D) $6.19
• E) $8.17

---

Definitions:

Competitive Strategy

The plan and actions taken by a company to attract customers and defend against competitors.

Product Cost

The total expense incurred in manufacturing or acquiring a product, including materials, labor, and overhead.

Delivery Time

The period it takes for a product or service to be delivered to a customer after an order has been placed.

Implied Demand Uncertainty

The unpredictability in demand faced by a company due to factors like customer preferences, market conditions, and technological changes, indirectly inferred through observed behaviors or trends.