Assume that you have 100 shares of ABC stock which has a volatility of 25% and a current stock price of 40 per share. ABC pays no dividends. The risk-free interest rate is 4% 1) Use the Black-Scholes option pricing model to value a one-year, at-the- money call option on ABC stock with the information as specified above. 2) What would be the value of an European put option on the same share with the same exercise price and expiry date as for the call? 3) Given the information above, what action should you take to hedge using call options? What would be the total value of the transaction? 4) Discuss the difficulties you would encounter in maintaining a perfectly hedged portfolio using only options