1. 1-The shares of ABC company are currently priced at 4.15. Call options on ABC stocks currently have an exercise price of 4 that expire in 3-months time. The prevailing risk free interest rate is 5%, and the volatility of the stock price is 0.22.
2. What is the price of a call option on ABC stock under the Black-Scholes-Merton pricing model?
3. What is the price of a put option on ABC stock, given a strike price of 4 and expiry date 3-months hence?
4. Assuming that you held 50,000 stocks for ABC. How would you construct a delta neutral hedge using ABC calls?
5. 

Cumulative Normal Probability Tables (Z-Values) Z -4.0 -3.9 -3.8 -3.7 -3.6 -3.5 -3.4 -3.3 -3.2 -3.1 -3.0 -2.9 -28 -2.7 -2.6 -2.5 -2.4 -23 -22 -2.1 -2.0 0.09 0.08 0.07 0.06 0.05 0.04 0.03 0.02 0.01 0.00 0.00002 0.00002 0.00002 0.00002 0.00003 0.00003 0.00003 0.00003 0.00003 0.00003 0.00003 0.00003 0.00004 0.00004 0.00004 0.00004 0.00004 0.00004 0.00005 0.00005 0.00005 0.00005 0.00005 0.00006 0.00006 0.00006 0.00006 0.00007 0.00007 0.00007 0.00008 0.00008 0.00008 0.00008 0.00009 0.00009 0.00010 0.00010 0.00010 0.00011 0.00011 0.00012 0.00012 0.00013 0.00013 0.00014 0.00014 0.00015 0.00015 0.00016 0.00017 0.00017 0.00018 0.00019 0.00019 0.00020 0.00021 0.00022 0.00022 0.00023 0.00024 0.00025 0.00026 0.00027 0.00028 0.00029 0.00030 0.00031 0.00032 0.00034 0.00035 0.00036 0.00038 0.00039 0.00040 0.00042 0.00043 0.00045 0.00047 0.00048 0.00050 0.00052 0.00054 0.00056 0.00058 0.00060 0.00062 0.00064 0.00066 0.00069 0.00071 0.00074 0.00076 0.00079 0.00082 0.00084 0.00087 0.00090 0.00094 0.00097 0.00100 0.00104 0.00107 0.00111 0.00114 0.00118 0.00122 0.00126 0.00131 0.00135 0.00139 0.00144 0.00149 0.00154 0.00159 0.00164 0.001690.00175 0.00181 0.00187 0.00193 0.00199 0.00205 0.00212 0.00219 0.00226 0.00233 0.00240 0.00248 0.00256 0.00264 0.00272 0.00280 0.00289 0.00298 0.00307 0.00317 0.00326 0.00336 0.00347 0.00357 0.00368 0.00379 0.00391 0.00402 0.00415 0.00427 0.00440 0.00453 0.00466 0.00480 0.00494 0.00508 0.00523 0.00539 0.00554 0.00570 0.00587 0.00604 0.00621 0.00639 0.00657 0.00676 0.00695 0.00714 0.00734 0.00755 0.00776 0.00798 0.00820 0.00842 0.00866 0.00889 0.00914 0.00939 0.00964 0.00990 0.01017 0.01044 0.01072 0.01101 0.01130 0.01160 0.01191 0.01222 0.01255 0.01287 0.01321 0.01355 0.01390 0.01426 0.01463 0.01500 0.01539 0.01578 0.01618 0.01659 0.01700 0.01743 0.01786 0.01831 0.01876 0.01923 0.01970 0.02018 0.02068 0.02118 0.02169 0.02222 0.02275 0.02330 0.02385 0.02442 0.02500 0.02559 0.02619 0.02680 0.02743 0.02807 0.02872 0.02938 0.03005 0.03074 0.03144 0.03216 0.03288 0.03362 0.03438 0.03515 0.03593 0.03673 0.03754 0.03836 0.03920 0.04006 0.04093 0.04182 0.04272 0.04363 0.04457 0.04551 0.04648 0.04746 0.04846 0.04947 0.05050 0.05155 0.05262 0.05370 0.05480 0.05592 0.05705 0.05821 0.05938 0.06057 0.06178 0.06301 0.06426 0.06552 0.06681 0.06811 0.06944 0.07078 0.07215 0.07353 0.07493 0.07636 0.07780 0.07927 0.08076 0.08226 0.08379 0.08534 0.08692 0.08851 0.09012 0.09176 0.09342 0.09510 0.09680 0.09853 0.10027 0.10204 0.10383 0.10565 0.10749 0.10935 0.11123 0.11314 0.11507 0.11702 0.11900 0.12100 0.12302 0.12507 0.12714 0.12924 0.13136 0.13350 0.13567 0.13786 0.14007 0.14231 0.14457 0.14686 0.14917 0.15151 0.15386 0.15625 0.15866 0.16109 0.16354 0.16602 0.16853 0.17106 0.17361 0.17619 0.17879 0.18141 0.18406 0.18673 0.18943 0.19215 0.19489 0.19766 0.20045 0.20327 0.20611 0.20897 0.21186 0.21476 0.21770 0.22065 0.22363 0.22663 0.22965 0.23270 0.23576 0.23885 0.24196 0.24510 0.24825 0.25143 0.25463 0.25785 0.26109 0.26435 0.26763 0.27093 0.27425 0.27760 0.28096 0.28434 0.28774 0.29116 0.29460 0.29806 0.30153 0.30503 0.30854 0.31207 0.31561 0.31918 0.32276 0.32636 0.32997 0.33360 0.33724 0.34090 0.34458 0.34827 0.35197 0.35569 0.35942 0.36317 0.36693 0.37070 0.37448 0.37828 0.38209 0.38591 0.38974 0.39358 0.39743 0.40129 0.40517 0.40905 0.41294 0.41683 0.42074 0.42465 0.42858 0.43251 0.43644 0.44038 0.44433 0.44828 0.45224 0.45620 0.46017 0.46414 0.46812 0.47210 0.47608 0.48006 0.48405 0.48803 0.49202 0.49601 0.50000 -1.9 -1.8 -1.7 -1.6 -1.5 -1.4 -1.3 -1.2 -1.1 -1.0 -0.9 -0.8 -0.7 -0.6 -0.5 -0.4 -0.3 -0.2 -0.1 0.0 Cumulative Normal Probability Tables (Z-Values) N 0.0 0.1 0.2 0.3 0.4 0.5 0.6 0.7 0.8 0.9 1.0 1.1 1.2 1.3 1.4 1.5 1.6 1.7 1.8 1.9 20 2.1 22 2.3 2.4 25 2.6 27 2.8 2.9 30 0.00 0.50000 0.53983 0.57926 0.61791 0.65542 0.69146 0.72575 0.75804 0.78814 0.81594 0.84134 0.86433 0.88493 0.90320 0.91924 0.93319 0.94520 0.95543 0.96407 0.97128 0.97725 0.98214 0.98610 0.98928 0.99180 0.99379 0.99534 0.99653 0.99744 0.99813 0.99865 0.99903 0.99931 0.99952 0.99966 0.99977 0.99984 0.99989 0.99993 0.99995 0.99997 0.01 0.02 0.03 0.04 0.50399 0.50798 0.51197 0.51595 0.54380 0.54776 0.55172 0.55567 0.58317 0.58706 0.59095 0.59483 0.62172 0.62552 0.62930 0.63307 0.65910 0.66276 0.66640 0.67003 0.69497 0.69847 0.70194 0.70540 0.72907 0.73237 0.73565 0.73891 0.76115 0.76424 0.76730 0.77035 0.79103 0.79389 0.79673 0.79955 0.81859 0.82121 0.82381 0.82639 0.84375 0.84614 0.84849 0.85083 0.86650 0.86864 0.87076 0.87286 0.88686 0.88877 0.89065 0.89251 0.90490 0.90658 0.90824 0.90988 0.92073 0.92220 0.92364 0.92507 0.93448 0.93574 0.93699 0.93822 0.94630 0.94738 0.94845 0.94950 0.95637 0.95728 0.95818 0.95907 0.96485 0.96562 0.96638 0.96712 0.97193 0.97257 0.97320 0.97381 0.97778 0.97831 0.97882 0.97932 0.98257 0.98300 0.98341 0.98382 0.98645 0.98679 0.98713 0.98745 0.98956 0.98983 0.99010 0.99036 0.99202 0.99224 0.99245 0.99266 0.99396 0.99413 0.99430 0.99446 0.99547 0.99560 0.99573 0.99585 0.99664 0.99674 0.99683 0.99693 0.99752 0.99760 0.99767 0.99774 0.99819 0.99825 0.99831 0.99836 0.99869 0.99874 0.99878 0.99882 0.99906 0.99910 0.99913 0.99916 0.99934 0.99936 0.99938 0.99940 0.99953 0.99955 0.99957 0.99958 0.99968 0.99969 0.99970 0.99971 0.99978 0.99978 0.99979 0.99980 0.99985 0.99985 0.99986 0.99986 0.99990 0.99990 0.99990 0.99991 0.99993 0.99993 0.99994 0.99994 0.99995 0.99996 0.99996 0.99996 0.99997 0.99997 0.99997 0.99997 0.05 0.51994 0.55962 0.59871 0.63683 0.67364 0.70884 0.74215 0.77337 0.80234 0.82894 0.85314 0.87493 0.89435 0.91149 0.92647 0.93943 0.95053 0.95994 0.96784 0.97441 0.97982 0.98422 0.98778 0.99061 0.99286 0.99461 0.99598 0.99702 0.99781 0.99841 0.99886 0.99918 0.99942 0.99960 0.99972 0.99981 0.99987 0.99991 0.99994 0.99996 0.99997 0.06 0.52392 0.56356 0.60257 0.64058 0.67724 0.71226 0.74537 0.77637 0.80511 0.83147 0.85543 0.87698 0.89617 0.91308 0.92785 0.94062 0.95154 0.96080 0.96856 0.97500 0.98030 0.98461 0.98809 0.99086 0.99305 0.99477 0.99609 0.99711 0.99788 0.99846 0.99889 0.99921 0.99944 0.99961 0.99973 0.99981 0.99987 0.99992 0.99994 0.99996 0.99998 0.07 0.08 0.52790 0.53188 0.56749 0.57142 0.60642 0.61026 0.64431 0.64803 0.68082 0.68439 0.71566 0.71904 0.74857 0.75175 0.77935 0.78230 0.80785 0.81057 0.83398 0.83646 0.85769 0.85993 0.87900 0.88100 0.89796 0.89973 0.91466 0.91621 0.92922 0.93056 0.94179 0.94295 0.95254 0.95352 0.96164 0.96246 0.96926 0.96995 0.97558 0.97615 0.98077 0.98124 0.98500 0.98537 0.98840 0.98870 0.99111 0.99134 0.99324 0.99343 0.99492 0.99506 0.99621 0.99632 0.99720 0.99728 0.99795 0.99801 0.99851 0.99856 0.99893 0.99896 0.99924 0.99926 0.99946 0.99948 0.99962 0.99964 0.99974 0.99975 0.99982 0.99983 0.99988 0.99988 0.99992 0.99992 0.99995 0.99995 0.99996 0.99997 0.99998 0.99998 0.09 0.53586 0.57535 0.61409 0.65173 0.68793 0.72240 0.75490 0.78524 0.81327 0.83891 0.86214 0.88298 0.90147 0.91774 0.93189 0.94408 0.95449 0.96327 0.97062 0.97670 0.98169 0.98574 0.98899 0.99158 0.99361 0.99520 0.99643 0.99736 0.99807 0.99861 0.99900 0.99929 0.99950 0.99965 0.99976 0.99983 0.99989 0.99992 0.99995 0.99997 0.99998 3.1 32 3.3 3.4 3.5 3.6 3.7 3.8 3.9 4.0