A non-dividend paying stock is trading at a price of £52.85 today. There is a European call option on this stock with strike price £50 and expiration date in 5 months. Interest is continuously compounded at r = 0.75%. Assuming that the volatility of the stock is 32% per annum. Answer the following question:

Use the Black-Scholes-Merton model to find the price of this option. [5 marks]

Use the put-call parity to obtain an approximate value for the price of a European put option on this stock with the same strike price and maturity as the put option described above. [5 marks]

What would be the price of this call if the share will pay a dividend yield of 2% [10 marks]