If the stock price is 44, the exercise price is 40, the put price is 1.54, and the Black- Scholes price using .28 as the volatility is 1.11, the implied volatility will be. Explain how?  A. higher than .28 B. lower than .28 C. .28 D. lower than the risk-free rate E. none of the above

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 5P
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If the stock price is 44, the exercise price is 40, the put price is 1.54, and the Black-
Scholes price using .28 as the volatility is 1.11, the implied volatility will be. Explain how? 

A. higher than .28
B. lower than .28
C. .28
D. lower than the risk-free rate
E. none of the above

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