What is the value of the following call option according to the Black Scholes Option Pricing Model? (To be done in excel with formulas showing)
Stock Price = $45.25
Strike Price = $45.00
Time to Expiration = 3 Months = 0.2 years.
Risk-Free Rate = 4.0%.
Stock Return Standard Deviation = 0.65.
Suppose the price of a stock falls.
a. What will happen to the price of a call option written on that stock?
b. What will happen to the price of a put option written on that stock?
Suppose the risk free rate rises.
a. What will happen to the price of a call option written on that stock?
b. What will happen to the price of a put option written on that stock?