Calculate the value of european call option

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Reference no: EM131918495

Solve for the current value of the call option using both a three-period and four-period binomial option pricing model assuming all parameters except time are the same.

The information needed is:

Stock price = $39

Exercise price = $40

Time to maturity = 0.5 years

Risk-free rate = 10% per year

Stock volatility = standard deviation of 40%/year

Using the Black-Scholes option pricing formula, calculate the value of a European call option that will not pay a dividend. What is the intrinsic value of this option? What is the time value of this option?

Reference no: EM131918495

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