What Is the Value of a 3-Month Call Option with a Strike

question 57

Multiple Choice

What is the value of a 3-month call option with a strike price of $25 given the Black-Scholes option pricing model and the following information?

• A) $3.38
• B) $3.42
• C) $3.68
• D) $4.27
• E) $5.39

---

Definitions:

Fixed Rate Mortgage

A mortgage in which the interest rate remains constant throughout the term of the loan.

Interest Rate

is the cost of borrowing money or the return on investment in a savings account, usually expressed as a percentage of the principal over a period of one year.

Tax Free Municipal Bond

A type of bond issued by local governments or their agencies, the interest from which is exempt from federal income taxes.

Taxable Yield

The interest rate on a bond or security that is subject to taxes, as opposed to a tax-exempt yield.