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Use the black-scholes option pricing model to estimate value

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Targezept Bionics, Inc., has a common stock outstanding that sells for $21 per share. A call option on the stock has an exercise price of $20 and will expire in three months. Based on an analysis of the stock's past volatility, you have estimated the standard deviation of returns to be 0.6. The short-term interest rate is now 5 percent and you expect that to remain constant over the next six months. Use the Black-Scholes option pricing model to estimate the value of this option.

Reference no: EM131135616

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