Compute the theoretical option values at standard deviations

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Question - On November 21, 2007, Citigroup (C) stock was trading around $30 a share. Its January call with exercise price of $27.5 traded for $4. The risk-free rate was 4%. Compute the theoretical option values at standard deviations of returns at (a) 20% (b) 40% (c) 60%. Which is the above is closest to its implied volatility? What does implied volatility reflect? You are recommended to use the computer program under doc sharing; do not show the computation but do show your inputs for this problem only.

Reference no: EM132165975

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