A second stock has a price given by . 100 + 3. The annual volatility of the stock is 22%. For a strike price given by . 100 + 2 and a risk free rate of 10%, using the Black-Scholes formula find the following:

a) Price of a two period call option.

b) Use the put-call parity to find the price of a two period put option.

c) Find the price of the put option using the Black-Scholes formula for put option. What do you notice?

x=0 y=2