A Stock's Current Price S Is $100 $\sigma$ = 25 Percent Per Year

question 21

Multiple Choice

A stock's current price S is $100.Its return has a volatility of $\sigma$ = 25 percent per year.European call and put options trading on the stock have a strike price of K = $105 and mature after T = 0.5 years.The continuously compounded risk-free interest rate r is 5 percent per year.
-The Black-Scholes-Merton model gives the price of the European call as:

• A) $5.99
• B) $8.26
• C) $10.00
• D) $12.34
• E) None of these answers are correct.

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