6.Today ,Ford Motor Company's stock price is $14.77/share.The average annual return for the stock is

6-8

7.37%, and the annualized volatility (standard deviation) is 43.27%. Under Black-Scholes-Merton Model's assumption, over the next 10 days, the expected value of the stock price is and the standard deviation of the change in the stock price is (Assume that there are 252 days a year) Use the following information for question 7 - 8. The current price of a non-dividend-paying stock is $40. Over the next year it is expected to rise to $42 or fall to $37. 7. You find a call option on the stock. The strike price of the option is $41. Using the call option to build a riskless portfolio, you could buy share of the stock for each option sold. 8. The risk-free rate is 4.2%. Under risk-neutral valuation, the expected stock price in a year is 7.37%, and the annualized volatility (standard deviation) is 43.27%. Under Black-Scholes-Merton Model's assumption, over the next 10 days, the expected value of the stock price is and the standard deviation of the change in the stock price is (Assume that there are 252 days a year) Use the following information for question 7 - 8. The current price of a non-dividend-paying stock is $40. Over the next year it is expected to rise to $42 or fall to $37. 7. You find a call option on the stock. The strike price of the option is $41. Using the call option to build a riskless portfolio, you could buy share of the stock for each option sold. 8. The risk-free rate is 4.2%. Under risk-neutral valuation, the expected stock price in a year is