Question: a. Use the Black-Scholes formula to find the value of a call option on the following stock. (You can find the spreadsheet in this chapter

a. Use the Black-Scholes formula to find the value of a call option on the following stock. (You can find the spreadsheet in this chapter as well as in Connect.)
i. Time to expiration 1 year
ii. Standard deviation 40% per year
iii. Exercise price $50
iv. Stock price $50
v. Interest rate 4% (effective annual yield)
b. Now recalculate the value of this call option, but use the following parameter values. Each change should be considered independently. Confirm that the value of the option changes in agreement with the prediction of Table 23.4.
i. Time to expiration 2 years
ii. Standard deviation 50% per year
iii. Exercise price $60
v. Stock price $60
vi. Interest rate 6%
c. In which case did increasing the value of the input not increase your calculation of option value?

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