Assume the following information for a stock and a call option written on the stock:

>Exercise price = $40

>Current stock price = $30

>The variance (² )=0.25 or 25%

>Time to expiration , t=0.25 years or a quarter

>Risk free rate of return =5% per annum.

a. Use the Black-Scholes procedure to determine the value of the call option.

b. Change the time to expiration , t, to 0.5 or six month and compute the call value again.