CASE 2.

The current price of a stock is $77, the sigma is 0.20 and the continuously-compounded risk-free rate is 4%. The stock does not pay any dividends. We want to price a call and a put option with strike of 75 and three months to maturity on this stock.

Suppose the stock described in Case 2 is priced at 5.15 and has the following Greeks: Delta = 0.60; Gamma = 0.05; theta= 0.020 (per day) (I) The stock price increased to 80 in 5 days. (II) The stock price decreased to 75 in 5 days.