Principles of Corporate Finance

Call Option

(d 1 ) =

ln + ( r + ) t

Ps

S

v^2

2

v t

(d 1 ) = - .3070 N(d 1 ) = 1 - .6206 = .3794

Example
What is the price of a call option given the following?
P = 36 r = 10% v = .40
S = 40 t = 90 days / 365