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?

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How different are the values you obtain from the prices shown on financeyahoocom ANSWER The va... View the full answer