# Try using the Black-Scholes model to value a call option on Facebook or Amazon. The inputs are the same as

This problem has been solved!

Do you need an answer to a question different from the above? Ask your question!

## Question:

Try using the Black-Scholes model to value a call option on Facebook or Amazon. The inputs are the same as those in our simple valuation example, except that instead of putting in the spread of possible stock prices, you must out in the standard deviation of stock returns. Assume a standard deviation of 45% for Facebook and 27% for Amazon. (At the time of writing, neither firm pays a dividend.) How different are the values you obtain from the prices shown on finance.yahoo.com? What happens to the option value if you change the standard deviation? Can you explain?

**Related Book For**

**View Solution**

Create a free account to access the answer

**Cannot find your solution?**

Post a FREE question now and get an answer within minutes.
* Average response time.