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1. Consider a call option on a non-dividend-paying stock where the stock price is $50, the strike price is equal to the stock price, the risk free is 5%, the time to maturity is 3 months, and the standard deviation is 20%. What is the Vega of the option?

A. 8.7763

B. 9.8220

C. 10.5325

D. 10.8756

E. None of the above

2. The Vega of the stock options owned by CEO of Starbucks is 7. The Vega of the stock options owned by CEO of Panera Bread is 8. When volatility increase by 2% from 0.35 to 0.37, the options owned by CEO of Starbucks will ___ in value; the options owned by CEO of Panera Bread will ___ in value.

A. decrease by 0.13, decrease by 0.17

B. increase by 0.14, increase by 0.16

C. increase by 0.13, increase by 0.17

D. decrease by 0.14, decrease by 0.16

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Financial Management, Finance

Category:- Financial Management
Reference No.:- M92718276

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