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Assume the following information for a stock and a Call option written on the stock. Exercise price=$40 Current stock price=$30 Variance of stocks=0.25 Time to

Assume the following information for a stock and a Call option written on the stock.

Exercise price=$40

Current stock price=$30

Variance of stocks=0.25

Time to expiration, t =0.25 years

Risk-free rate =0.05

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

  1. Change the time to expiration, t, to 0.5 years and determine the value for the amended Call option.

  1. What is the difference between the two option values?

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