Everything else equal, when the underlying assets become more volatile, the American call option (no dividend paid till expiration) value becomes higher; the value of the American put option will be also higher.

A. False

B. True

Call options are more valuable when, everything else equal, the underlying asset value becomes more volatile

A. True

B. False

You are given the following information about a European call option on stock ABC: S = $40; X = $37; R = 4.5% per year, continuously compounded; sigma = 53%; and T = 2 years.

- What is N(d2) when you use the Black-Scholes formula to price the option (choose the closest one)?

A. 0.5989

B. 0.7254

C. 0.4401

D. -0.1507

- What is d1 when you use the Black-Scholes formula to price the option?

A. 0.5989

B. 0.7254

C. 0.4401

D. -0.1507

- What is the call option value when you use the Black-Scholes formula to price the option (choose the closest one)?

A. 14.13

B. 25.87

C. 17.50

D. 20.00