Chosen company : AT&T

Open Ended Questions (Show Calculations to Get Any Credit) Q1. Choose a company and calculate the following information about options on the stock of a certain company. (50 points) So = current Price X = Choose re = 1.75% T = 1.0 o = calculate from the data (first download the data and then calculate the standard deviation of returns). No dividends are expected. Answer the following questions:. a. What value (premium) does the Black-Scholes-Merton model predict for the call? (15 points) b. Suppose you feel that the call is overpriced. What strategy should you use to exploit the apparent mis-valuation? (5 points) C. How do you construct a riskless hedge, and calculate the number of puts per 100 shares purchased? Explain (5 points)