A 6-mo at-the-money call on IBM is at fair value at the opening of today's trading. \begin{tabular}{|l|l|r|} \hline Initial stock volatility = & 35% & \\ \hline Interest rates are at & 2% & \\ \hline Call Fair Value = & 8.97 & 0.6217 \\ \hline The Greeks are : & delta & 0.0134 \\ \hline & gamma & 0.2688 \\ \hline vega for 1% change & 0.0434 \\ \hline & theta per day & 0.2429 \\ \hline rho for 1% & \% & \\ \hline \end{tabular} Assume all Greeks are constant throughout your calculations. Q1: A morning earnings announcement by IBM is positive news. The stock moves up immediately by Using the delta estimate the new call value. Using the delta and gamma estimate the new call value. \$2 per share Q2: The earnings announcement also causes the stock volatility on the day toriseto> A Using the value in Q1B estimate the new call value. Q3: In addition on the same day the Federal Reserve raises interest rates by 30 basis points Use the answer in Q2 to calculate the revised option value. Q4: What will the call in Q3 be worth in 5 days? Start with the answer to Q3 and estimate the new call value. A 6-mo at-the-money call on IBM is at fair value at the opening of today's trading. \begin{tabular}{|l|l|r|} \hline Initial stock volatility = & 35% & \\ \hline Interest rates are at & 2% & \\ \hline Call Fair Value = & 8.97 & 0.6217 \\ \hline The Greeks are : & delta & 0.0134 \\ \hline & gamma & 0.2688 \\ \hline vega for 1% change & 0.0434 \\ \hline & theta per day & 0.2429 \\ \hline rho for 1% & \% & \\ \hline \end{tabular} Assume all Greeks are constant throughout your calculations. Q1: A morning earnings announcement by IBM is positive news. The stock moves up immediately by Using the delta estimate the new call value. Using the delta and gamma estimate the new call value. \$2 per share Q2: The earnings announcement also causes the stock volatility on the day toriseto> A Using the value in Q1B estimate the new call value. Q3: In addition on the same day the Federal Reserve raises interest rates by 30 basis points Use the answer in Q2 to calculate the revised option value. Q4: What will the call in Q3 be worth in 5 days? Start with the answer to Q3 and estimate the new call value