The following option prices were observed for calls and puts on a stock for the trading day of July 6 of a particular year. The stock was priced at 165.13. The expirations were July 17, August 21, and October 16. The continuously compounded risk-free rates associated with the three expirations were 0.0503, 0.0535, and 0.0571, respectively. Unless otherwise indicated, assume that the options are European.

	CALLS			PUTS
STRIKE	JUL	AUG	OCT	JUL	AUG	OCT
155	10.50	11.75	14.00	0.19	1.25	2.75
160	6.00	8.13	11.13	0.75	2.75	4.50
165	2.69	5.25	8.13	2.38	4.75	6.75
170	0.81	3.25	6.00	5.75	7.50	9.00

Let the standard deviation of the continuously compounded return on the stock is 21 percent. Ignore dividends. Respond to the following:

What is the theoretical fair value of the October 165 call?

If the stock price decreased by $2, what will be the theoretical fair value of the October 165 call?

If the stock price increased by $2, what will be the theoretical fair value of the October 165 call?