Using Goal Seek function in Excel, and the spreadsheet posted, answer the following questions. Consider an European call option, with the following information

Time to expiration = 6 months

Historical standard deviation = 30% per year

Exercise price = $105

Stock price = $100

Interest rate = 5%

a. What is the implied volatility of the option if the option currently sells for $8? (Hint: go to the Menu of spreadsheet and select Goal Seek. The dialog box will ask you for three pieces of information. In that dialog box, you should set cell E6 to value 8 by changing cell B2. In other word, you ask the spreadsheet to find the value of the option in cell E6 equal to $8. Then click OK, and you should find the call now is work $8 and the entry for standard deviation has been changed to a level consistent with this value. This the call's implied volatility at a price of $8) implied volalitity = ?

b. What is the implied volatility of the option if the option currently sells for $9.5?

implied volalitity = ?

c. What is the implied volatility of the option if the option price is unchanged at $8, but the option expiration is lower, say 3 months (T = 0.25) implied volalitity = ?

d. What is the implied volatility of the option if the option price is unchanged at $8, but the exercise price is lower, say only $100.

implied volalitity = ?

e. What is the implied volatility of the option if the option price is unchanged at $8, but the stock price is lower, say only $98

implied volalitity = ?