20. You calculate the Black-Scholes value of a call option as $3.50 for a stock that does not pay dividends, but the actual call price is $3.75. The most likely explanation for the or the volatility you input into the discrepancy is that either the option is model is too B. undervalued and should be written; low: A. overvalued and should be written; low: C. overvalued and should be purchased; high: D. undervalued and should be purchased; high 21. In order for a binomial option price to approach the Black Scholes price, A. the number of subintervals must increase substantially B. the volatility must be low; C. the volatility must be high; D. the probability of each subinterval needs to be similar to the stock's standard deviation; E. the interest rate needs to increase 22. If the S&P 500 Index futures contract is overpriced relative to the S&P 500 Index, you should A. buy all the stocks in the S&P 500 and write put options on the S&P 500 Index B. sell all the stocks in the S&P 500 and buy call options on S&P 500 Index C. sell the S&P 500 Index D. sell S&P 500 Index futures and buy all the stocks in the S&P 500. E. sell short all the stocks in the S&P 500 and buy S&P 500 Index futures