Purpose of Black-Scholes Model in Option Valuation

Very Easy Option Valuation Black-scholes Model

Consider a European call option on a stock with the following parameters: the current stock price is $50, the strike price is $55, the risk-free interest rate is 5% per annum, the volatility of the stock is 20%, and the time to maturity is 1 year. Using the Black-Scholes model, what is the primary purpose of this option valuation method?

To determine the historical returns of the underlying stock.

To provide a theoretical price for options based on current market conditions.

To measure the correlation between different securities.

Hint

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