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    value of volatility

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    You calculate the black schoals value of a call option as $3.50 for a stock that doesnâ??t pay dividends but the actual price is $3.75 . The most likely explanation is that either the option is_________or the volatility you input into the model is too_________

    a. Overvalued and should be written; low
    b. Undervalued and should be written; low
    c. Overvalued and should be purchased; high
    d. Undervalued and should be purchased; high
    e. None

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    e. None.

    The value of call is $3.50 against the actual price of $3.75 which means that ...

    Solution Summary

    This solution exemplifies the value of volatility.