Consider a European put option that expires in one year with an exercise price of $100 trading on a stock currently priced at $115. Assuming an annualized volatility of the continuously compounded return on the stock of 0.3 and an annual risk-free rate of 0.05, use the Black-Scholes- Merton model applied to European puts to price the option. This question has 5 parts. Answer Parts (a) to (e) below. Part (a) Compute d and find N(-d) (4 marks) Part (b) Compute d and find N(-d) (2 marks) Part (c) Calculate the value of the put option (2 marks) Part (d) If the put is selling for $4, is the put overpriced or underpriced? Recommend a riskless strategy. (3 marks) Part (e) If the stock price decreases by $1, how will the option position offset the loss on the stock? (3 marks) 7 A B I 5 # Part (a) Compute d and find N(-d) (4 marks) Part (b) Compute d and find N(-d) (2 marks) Part (c) Plug into formula for P (2 marks) % $$ ! *** Part (d) If the put is selling for $4, is the put overpriced or underpriced? Recommend a riskless strategy. (3 marks) Part (e) If the stock price decreases by $1, how will the option position offset the loss on the stock