Answer everything on a piece of paper using correct formulas showing all work

1. Employee Stock Options Gary Levin is the chief executive officer of Mou Mr. Levin 25,000 at-the- money European call options on the company's stoc $55 per share. The stock pays no dividends. The options standard deviation of the returns on the stock is 61 percent. Treasury five years currently yield a continuously compounded interest rate of 6 percent. a. Use the Black-Scholes model to calculate the value of the stock options. b. You are Mr. Levin's financial adviser. He must choose between the previously men- k, which is currently trading at will expire in five years, and the bills that mature in tioned stock option package and an immediate $750,000 bonus. If he is risk-neutral, which would you recommend? c. How would your answer to (b) change if Mr. Levin were risk-averse and he could not sell the options prior to expiration