All else constant,which one of the following situations will produce the highest call price given a strike price of $27.50?
A) $25 stock price; 15 percent standard deviation
B) $25 stock price; 30 percent standard deviation
C) $30 stock price; 15 percent standard deviation
D) $30 stock price; 30 percent standard deviation
E) Insufficient information is provided to answer this question.

Question

Quizplus · Accepted Answer

With all else constant, a higher stock price and higher standard deviation will lead to a higher call price. Therefore, option D with a $30 stock price and a 30 percent standard deviation will provide the highest call price.

All Else Constant,which One of the Following Situations Will Produce