1. Consider a call option that gives the long call the right to purchase the underlying asset for $4.56 in 0.25 years. The continuously compounded risk-free interest rate is 2.5%. The underlying asset price is $4.70. By how much will the long call chage in value as the volatility of the underlying asset return increases from 5% to 45%?
A) $0.66 B) $ 0.33 C) - $0.66 D) -$0.33
2. Consdier a forward with expiration in 1 year. The underlying asset pays no income. The continuously compounded risk-free interest rate is 2.5%. The forward price is $45. By how much will the long forward increase in value as the underlying asset's market price increases from $52 to $53?
A) $1 B) 0 C) $1.09 D) None of the the answers