Recalculate the value of the option in Problem 10, successively substituting one of the ch...

Recalculate the value of the option in Problem 10, successively substituting one of the changes below while keeping the other parameters as in Problem 10:

a. Time to expiration = 3 months

b. Standard deviation = 25% per year

c. Exercise price = $55

d. Stock price = $55

e. Interest rate = 5%

Problem 10. Use the Black-Scholes formula to find the value of a call option on the following stock:

Time to expiration = 6 months

Standard deviation = 50% per year

Exercise price = $50

Stock price = $50

Interest rate = 3%

The Black-Scholes Formula

Financial economists searched for years for a workable option-pricing model before Black and Scholes (1973) and Merton (1973) derived a formula for the value of a call option. Now widely used by options market participants, the Black-Scholes pricing formula for a European-style call option is