2 Black-Scholes Use the Black-Scholes formula to solve these three problems 1. Price a one year European call option with strike price $22, written on a $20 stock. Volatility is 15%. The stock will pay a dividend of $2 in 1 month's time, and another of $3 in 7 months, time. Interest rates are 2% (with continuous compounding). to price the option. 3 month European put option with strike price 1400. The firms in the index pay dividends at 2. Now suppose that the option in the previous question was American. Use Black's approximation 3. The S&P500 index is currently at 1300. Volatility is 10%, and interest rates are 2.5%. Price a a continuous rate of 1.5%