A stock has a price of $84 and a volatility of 25% per annum. European options on the stock have a strike price of $80 and a time to maturity of 180 days. The risk free interest rate is 5% per annum on a continuously compounded basis. The stock pays dividends at a continuously compounded rate of 3.0%. Use the BSMOPM. Use this information to answer this and the next 4 questions.

The risk-neutral probability that the put option will be worth exercising on the expiration date is closest to:

a.0.5973

b.0.3372

c.0.4027

The value of the European call option is closest to:

a.$8.30

b.$6.30

c.$4.30

Which of the following is the correct position in the stock to hedge a position in 200 written puts on the stock?

a.Short-sell 130.61 shares of stock

b.Buy 66.31 shares of stock

c.Short-sell 66.31 shares of stock