Taggart Transcontinental's stock has a volatility of 25% and a current stock price of $40 per share. Taggart pays no dividends. The risk-free interest rate is 4%. (Please use an Excel function, norm.dist(x,0,1,1), to compute the value of N(x).)

Assuming the beta on Taggart stock is 0.75, then the beta for a one-year, at-the-money call option on Taggart stock is closest to:

1. 0.60

2. 0.75

3. 2.84

4. 3.89