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Consider a stock with current price 100. An 120-strike European call option that expires in...

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Consider a stock with current price 100. An 120-strike European call option that expires in T-years is written on this stock. You are given the following information. i) The stocks volatility is 30% ii) The stock's continuous dividend rate is . iii) The continuously compounded risk-free rate is 8%. iv) The stock price follows the Black-Scholes framework. (a) Suppose d = 0. (i) What is the price of the call option if T = 1? (ii) What is the limit of the price as T + oo? (b) Repeat (a) if 8 = 0.1%. Consider a stock with current price 100. An 120-strike European call option that expires in T-years is written on this stock. You are given the following information. i) The stocks volatility is 30% ii) The stock's continuous dividend rate is . iii) The continuously compounded risk-free rate is 8%. iv) The stock price follows the Black-Scholes framework. (a) Suppose d = 0. (i) What is the price of the call option if T = 1? (ii) What is the limit of the price as T + oo? (b) Repeat (a) if 8 = 0.1%

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