Question: As discussed in Application 4.4: Puts, Calls, and Black-Scholes, a call option provides you with the option to buy a share of, say, Microsoft stock

As discussed in Application 4.4: Puts, Calls, and Black-Scholes, a call option provides you with the option to buy a share of, say, Microsoft stock at a specified price of $60. Suppose that this option can be exercised only at exactly 10:00 am on June 1, 2009. What will determine the expected value of the transaction underlying this option? What will determine the variability around this expected value? Explain why the greater this expected variability, the greater is the value of this option.

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