Repeat the analysis of problem 14.17 assuming that the volatility of the stock's return is 40%. Intuitively,

Question:

Repeat the analysis of problem 14.17 assuming that the volatility of the stock's return is 40%. Intuitively, would you expect this to cause the call price to rise or fall? By how much does the call price change?

Data from problem 14.17

A stock trades for $45 per share. A call option on that stock has a strike price of $50 and an expiration date one year in the future.

Strike Price
In finance, the strike price of an option is the fixed price at which the owner of the option can buy, or sell, the underlying security or commodity.