Consider a call option on Computer Plus Company stock. The option will expire one year from today and the exercise price is \($35.\) The risk-free rate is 7 percent. Computer Plus stock is selling for \($37\) per share and your estimate of variance of the return on the stock is 0.004.

a. Use the Black-Scholes model to price the call.

b. You have found out that the estimate of the variance should be revised to 0.0064.
What should the new price of the call be?

c. The stock price dropped to \($35\) after the announcement that the company is about to shut down three factories in California. Using the result in part (b), what should the new price of the call be?