Consider the following price data for TanCo stock in two different subperiods Subperiod A 168 225 162 625 162 515 161 560 160 880 157 790 157 350 157 600 161 465 162 195 157 330 156 625 157 895 155 345 150 675 155 730 154 315 155 885 156 105 152 885 150 340 150 515 Subperiod B 122 825 124 625 121 630 120 895 119 535 118 675 117 700 119 650 122 300 121 555 120 220 117 675 118 740 115 920 117 695 117 505 118 755 117 730 114 435 110 550 For each subperiod, calculate the annualized historical measure of stock volatility that could be used in pricing an option for TanCo In your calculations, you may assume that there are 250 trading days in a year Do not round intermediate calculations Round your answers to four decimal places Period A Period B Suppose now that you decide to gather additional data for each subperiod Specifically, you obtain information for a call option with a current price of $13 05 and the following characteristics X 114 S 122 75 time to expiration 62 days RFR 6 50 and dividend yield 3 30 Here the risk free rate and dividend yields are stated on an annual basis Use the volatility measure from Subperiod B and the Black Scholes model to obtain the fair value for this call option Based on your calculations, is the option currently priced as it should be Assume 365 days in a year You may use Appendix D to answer the question Do not round intermediate calculations Round your answer to the nearest cent $ The market price of $13 05 is Select higherlowerItem 4 than the calculated BS price This implies that if all of the other parameters of the model are correct, the implied BS volatility is Select higherlowerItem 5 than the historical volatility

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Consider the following price data for TanCo stock in two different subperiods: Subperiod A : 168.225; 162.625; 162.515; 161.560; 160.880; 157.790; 157.350; 157.600; 161.465; 162.195;

Consider the following price data for TanCo stock in two different subperiods:

Subperiod A: 168.225; 162.625; 162.515; 161.560; 160.880; 157.790; 157.350; 157.600; 161.465; 162.195; 157.330; 156.625; 157.895; 155.345; 150.675; 155.730; 154.315; 155.885; 156.105; 152.885; 150.340; 150.515

Subperiod B: 122.825; 124.625; 121.630; 120.895; 119.535; 118.675; 117.700; 119.650; 122.300; 121.555; 120.220; 117.675; 118.740; 115.920; 117.695; 117.505; 118.755; 117.730; 114.435; 110.550

For each subperiod, calculate the annualized historical measure of stock volatility that could be used in pricing an option for TanCo. In your calculations, you may assume that there are 250 trading days in a year. Do not round intermediate calculations. Round your answers to four decimal places.

Period A:

Period B:
Suppose now that you decide to gather additional data for each subperiod. Specifically, you obtain information for a call option with a current price of $13.05 and the following characteristics: X = 114; S = 122.75; time to expiration = 62 days; RFR = 6.50%; and dividend yield = 3.30%. Here the risk-free rate and dividend yields are stated on an annual basis. Use the volatility measure from Subperiod B and the Black-Scholes model to obtain the "fair value" for this call option. Based on your calculations, is the option currently priced as it should be? Assume 365 days in a year. You may use Appendix D to answer the question. Do not round intermediate calculations. Round your answer to the nearest cent.

$

The market price of $13.05 is -Select-higherlowerItem 4 than the calculated BS price. This implies that if all of the other parameters of the model are correct, the implied BS volatility is -Select-higherlowerItem 5 than the historical volatility.