A European call option on shares has 3 months to expiry. The current share price is £3 and the exercise price of the option is £2.50. The standard deviation of the share is 20 per cent, and the...

A European call option on shares has 3 months to expiry. The current share price is £3 and the exercise price of the option is £2.50. The standard deviation of the share is 20 per cent, and the risk-free rate is 5 per cent. Use the Black–Scholes model to value the call option of a share.