3) A stock has a current price of $115.83. A European call option on the stock expires in eight weeks, and has N(d1) = .33 If volatility changes by 0.03, approximate the amount the call price is expected to change

4) Suppose the following:

i) Stock Price$80

ii) Volatility0.35

iii) Risk Free Rate5%

You buy a call option with exercise price of $80, and it expires in 3 months a) What is the theoretical FV of the option?

b) If the actual call is selling in the market at $5/call, what strategy will you implement?

1 month later the stock price is $70, and you decide to unwind the position c) What is the FV of call option at that time

d) If you bought & sold the call option at FVs, what is the profit/loss on the strategy