Question: The exercise price on one of Flanagan Company's options is $15, its exercise value is $22, and its time value is $5. What are the option's market value and the price of the stock?
2. Use the Black-Scholes model to find the price for a call option with the following inputs:
(1) current stock price is $30,
(2) exercise price is $35,
(3) time to expiration is 4 months,
(4) annualized risk-free rate is 5%, and
(5) variance of stock return is 0.25.