Calculate the price of one call option

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An investor is very bullish about the stock market but does not want to take too much risk. He decides to buy four American call options on one particular stock. Each option is for 100 shares with exercise price at $65 per share and maturity of eight months. He is told that the expected return from the stock is 20% per annum with annual volatility of 30%. The current stock price is $61. The risk free rate is 6% per annum. Calculate the price of one call option, assuming the stock will not pay any dividends before maturity of the option.

Reference no: EM132011743

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