(Pricing a call) A call option with 6 months to maturity is written on a stock whose current price is $40. The option’s exercise price is $38, the interest rate is 4%, and the stock’s volatility is 30%.

a. Find the call option price using the Black–Scholes model.

b. Make a table showing the option’s price for volatilities ranging from 10%, 20%, . . ., 60%. (Excel hint: By far the easiest way to do this is to use Data Table, explained in Chapter 24.)