Implied Volatility of the Option Assignment | Homework For You

If an ATM Call option with expiry in one year trades at 1% of its spot price (which is equal to the strike). What is the implied volatility of the option, assuming a zero interest rate and no dividends.
1% 02% 2.5% O 3%
How would your answer (to the previous question) change if instead of having a strike equal to the spot and O interest rate, we assume an interest rate of “s” and we set the strike to the current spot times exp(r).
o answer does not change
o answer depends on the spot price
o answer depends on the interest rate
answer depends both on the spot and the interest rate. Get Finance homework help today