You Calculate the Black-Scholes Value of a Call Option as $3.50

question 55

Multiple Choice

You calculate the Black-Scholes value of a call option as $3.50 for a stock that does not pay dividends, but the actual call price is $3.75. The most likely explanation for the discrepancy 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

---

Definitions:

Hard Influence Tactic

A coercive strategy used to influence others' actions or decisions by exerting power or pressure, similar to hard influence tactics with emphasis on control.

Forming Coalitions

The process of creating alliances or partnerships between groups or individuals to achieve a common goal or address a common issue.

Strike

A collective work stoppage by a group of employees, often through a union, to express grievances or demand better conditions or pay.

Controlling Information

The management practice of regulating and determining the flow, access, and accuracy of information within an organization.