Answer to Question #28014 in Management for Judite

Question

An analyst is interested in usng the Black-Schole model to value call options on the share of Meed Ltd. The analyst has accumulated the following information:
the price of the share is R40
The srike price is R40
The option matures in 3 months (=0.25)
The standard deviation of the share's return is 0.40 and the variance is 0.16
the risk-free is 6 percent
Given the information, th analyst is then able to calculate some other necessary components of the Block-Scholes model:
d1 = 0.175
d2 = 0.025
N(d1) = 0.56946
N(d2) = 0.49003
N(d1) amd Nd2 represent areas under a standard normal distribution funcion. Using the Black Scholes mode, what is the value of the call option?