3.Assume a stock has a current price of $65, the interest rate is 9.0% (continuously compounded) the dividend yield is 3% and the time horizon is 6 months. The volatility is 0.25.

a. Calculate the upper and lower prices for a binomial tree and the call option price.

b.Assume that the volatility increases to 0.35. Recalculate the stock prices and option price.

c. Is the change in option price, less than, equal to, or greater than the change in volatility?