Your employer is offering you stock options on the firm as part of your pay package. You know the following about this offer:

Current Stock Price $25

Exercise Price $35

Maturity (yrs) 2

Risk-free Rate 4.5%

Stock Volatility 30%

What is the value of the option? Suppose the Fed reduces Treasury rates to 4.0%, what is the new price of the option? Your company's share price falls to $23, what is the new price of the option?

Please use excel and show formulas