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Which of the following options is the most expensive? Why? Option Premium (AOL) Implied Volatility K May June July 120 8.75 15.40 20.90 125 5.75

Which of the following options is the most expensive? Why?

Option Premium (AOL)

Implied Volatility

K	May	June	July
120	8.75	15.40	20.90
125	5.75	13.50	18.60
130	3.6	11.35	16.40

Implied Volatilities of AOL Calls S0=125.9375,rc=.0447(May),.0446(June),.0453(July),T=.0192(May),.0959(June),.1726(July) Implied Volatilities of AOL Calls S0=125.9375,rc=.0447(May),.0446(June),.0453(July),T=.0192(May),.0959(June),.1726(July)

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