1. a) Use the Black-Scholes model to determine the option price for a call option which will expire in 0.5 year. The strike price is $18, the stock pays no dividends and has a current market price of $20. The annualized volatility of the stock is 15%. The interest rate on a T-bill that matures in one year is 2%.

1. b) ABC has 450,000 shares outstanding. If all of its outstanding warrants were exercised, the total number of shares outstanding would be 480,000. What is the value of the warrant if an otherwise-identical call option is trading at $16.5?