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2. Suppose XYZ is a non-dividend-paying stock. The current stock price is S = $60, the volatility is = 40%, and the risk-free interest rate
2. Suppose XYZ is a non-dividend-paying stock. The current stock price is S = $60, the
volatility is = 40%, and the risk-free interest rate is r = 3%.
(a) Using the Black-Scholes-Merton formula or the Black-Scholes-Merton calculator,
nd the price of a three-year European call option on XYZ with a strike price of
$65.
(b) Using put-call parity, nd the price of a three-year European put option on XYZ
with the same strike price. (Please show the calculation using put-call parity. Do
not simply take the put value from a Black-Scholes-Merton calculator.)
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