The current stock price of Johnson & Johnson is $72, and the stock does not pay
ID: 2633363 • Letter: T
Question
The current stock price of Johnson & Johnson is $72, and the stock does not pay dividends. The instantaneous risk-free rate of return is 3%. The instantaneous standard deviation of J&J's stock is 40%. You want to purchase a call option on this stock with an exercise price of $63 and an expiration date 57 days from now.
The current stock price of Johnson & Johnson is $72, and the stock does not pay dividends. The instantaneous risk-free rate of return is 3%. The instantaneous standard deviation of J&J's stock is 40%. You want to purchase a call option on this stock with an exercise price of $63 and an expiration date 57 days from now.
Explanation / Answer
The correct answer is $10.41.
This is calculated using the Black Scholes option calculator located at: http://www.tradingtoday.com/black-scholes?callorput=c&strike=63&stock=72&time=57&volatility=40&interest=3
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