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7. Options A. How does the price of a call option respond to the following changes, other things equal? Does the price go up or

7. Options A. How does the price of a call option respond to the following changes, other things equal? Does the price go up or down? Explain briefly the intuition for your answer. (1). Exercise price rises. (ii). Volatility of stock price rises. B. Suppose FlyByNight Corporation (FBN) is selling a one-year European call option that has an exercise price of $40. Assume that FBN's stock is currently selling for $35 and that over the coming year the price will either rise to $80 or fall to $22. Also assume that the one-year rate of interest is 10 percent. What would be the market price for this call option? Please explain carefully

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