Consider the following data: Price of stock now = P = 815 Standard deviation of continuously compounded annual returns = = 0.2578 Years to

Consider the following data:

Price of stock now = P = 815

Standard deviation of continuously compounded annual returns = σ = 0.2578

Years to maturity = t = 0.5 I

nterest rate per annum = rf = 0.5% for 6 months (1% per annum)

Beta of the stock = 1.67

Risk-free loan beta = 0

a-1. Calculate the risk (beta) of a six-month call option with an exercise price of $815. (Do not round intermediate calculations. Round your answer to 2 decimal places.)

a-2. Calculate the risk (beta) of a six-month call option with an exercise price of $665. (Do not round intermediate calculations. Round your answer to 2 decimal places.) a-3. Does the risk rise or fall as the exercise price is reduced?

b-1. Now calculate the risk of a one-year call with an exercise price of $815. (Do not round intermediate calculations. Round your answer to 2 decimal places.)

b-2. Does the risk rise or fall as the maturity of the option lengthens?