A call option has an exercise price of $65 and matures in six months. The current stock price is $67, and the risk-free rate is 5 percent per year, compounded continuously. What is the price of the call if the standard deviation of the stock is 0 percent per year? (Do not round intermediate calculations and round your answer to 2 decimal places, e.g., 32.16.)
Call option price= ___________
Since there's no volatility, the stock must earn the risk-free rate, thus the forward price is 67* e^(0.05*0.5)= 68.69
and thus the call option price is 68.69-65= 3.69
Thus the call option price is $3.69
A call option has an exercise price of $65 and matures in six months. The current...