Taagart has a volatility of 25% and a current share price of $40. Taagart does not pay

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Taagart has a volatility of 25% and a current share price of $40. Taagart does not pay dividends. The risk-free interest rate is 4%. Assume a one-year at-the-money call option. An increase in the volatility of the option from 25% to 40% affects the price of this call option so that it:

A) increases by $0.70
B) increases by $2.30
C) decrease by $1.70
D) increases by $2.80

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Financial Reporting And Analysis

ISBN: 9781260247848

8th Edition

Authors: Lawrence Revsine, Daniel Collins, Bruce Johnson, Fred Mittelstaedt, Leonard Soffer

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Posted Date: Dec 12, 2023 11:29 PM

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Taagart has a volatility of 25% and a current share price of $40. Taagart does not pay

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Impact of increased volatility on atthemoney call option We know Taagarts current volatility 25 Curr... View the full answer

Financial Reporting And Analysis

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