A stock trades for $45 per share. A call option on that stock has a strike price of $54 and an expiration date six months in the future. When the volatility of the stock's returns is 30%, the Black and Scholes value of the option is $3.82. Now assume, the volatility of the stock's returns is 47%, and the risk-free rate is 6%. Intuitively, would you expect this to cause the call price to rise or fall? By how much does the call price change? + Intuitively, would you expect this to cause the call price to rise or fall? (Select the best answer below.) OA. The call price will not change with the volatility of the stock's returns. GB The call price will fall with the volatility of the stock's returns. C. The call price will rise with the volatility of the stock's returns. The Black and Scholes value of this call option is $ (Round to the nearest cent.)

A stock trades for $45 per share. A call option on that stock has a strike price of $54 and an expiration date six months in the future. When the volatility of the stock's returns is 30%, the Black and Scholes value of the option is $3.82. Now assume, the volatility of the stock's returns is 47%, and the risk-free rate is 6%. Intuitively, would you expect this to cause the call price to rise or fall? By how much does the call price change? + Intuitively, would you expect this to cause the call price to rise or fall? (Select the best answer below.) OA. The call price will not change with the volatility of the stock's returns. GB The call price will fall with the volatility of the stock's returns. C. The call price will rise with the volatility of the stock's returns. The Black and Scholes value of this call option is $ (Round to the nearest cent.)

Intermediate Financial Management (MindTap Course List)

13th Edition

ISBN:9781337395083

Author:Eugene F. Brigham, Phillip R. Daves

Publisher:Eugene F. Brigham, Phillip R. Daves

Chapter5: Financial Options

Section: Chapter Questions

Problem 4MC

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