Question: 3. (5 points) Using the Black/Scholes Option Pricing Model, calculate the value of the call option given: S= 85; X=95; T=6 months; =.6; Rf=10% (1

3. (5 points) Using the Black/Scholes Option Pricing Model, calculate the value of the call option given: S= 85; X=95; T=6 months; =.6; Rf=10% (1 pt)

What is the intrinsic value of the call?_____________

If the exercise price would decrease, the value of the call would ___________?

If the time to maturity were 3-months instead of six months, the value of the call would ___________?

If the stock price where $65, the value of the call would ___________?

What is the maximum value that a call can take? Why?

What is the minimum value that a call can take? Why?

What increase in price does the stock have to achieve in order to break-even? ___________

What is the time value of the call option?____________

If you buy a bottom-straddle what strategy are you trying to use?

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