You used the Black-Scholes model to estimate the price of a Google put option that expires in one year. You used the average historical standard deviation of Google's stock returns over the past 3 years in estimating sigma. Your Black Scholes price is $35.00. When you look in the newspaper you find the option is trading for $40. Your results imply:

• Google's beta is higher than the average stock.

• That the option is underpriced.

• The market is forecasting lower volatility for Google than was experienced over the past 3 years.

• The market is forecasting higher volatility for Google than was experienced over the past 3 years.