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Compute the black-scholes-merton price of the call

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Question - A stock is priced at $50 with a volatility of 35 percent. A call option with an exercise price of $50 has an expiration in one year. The risk-free rate is 5 percent. Construct a table for stock prices of $5, 10, 15, ..., 100.

Required - Compute the Black-Scholes-Merton price of the call and the European lower bound and verify that the former is at least as large as the latter. Provide in-text citations and explain in detail.

Reference no: EM133154361

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