Construct the volatility surface using the options in Exhibit 3. Assume the dividend yield for options with 1 year to maturity is 3.6% and for options with 2 years to maturity 2.6%. Exhibit 3 Listed American Options on Citigroup Stock on January 25, 2008 Expiration Option Strike Price Bid Ask Open Date Symbol Type (5 (S) (5) Interest VRN.AE Call 25 4.70 4.70 39.297 VRN.AF Call 30 17 Jan 2009 2.60 2.61 87,923 VRN.ME Put 25 3.40 3.45 69,211 VRN.ME Put 30 6.25 6.25 105.537 WRV.AE Call 25 6.40 19.821 WRV.AF Call 30 16 Jan 2010 4.15 4.45 44,015 WRV.ME Put 25 4.75 4.90 23,785 WRV.MF Put 30 7.90 49,501 6.10 7.55 No options with a longer maturity were listed. The bid price or 'bid' (ask price or ask") is the price received (paid) by option sellers (buyers). The open interest' for a given option is the number of options outstanding, i.e., the number of long positions (which equals that of short positions) Construct the volatility surface using the options in Exhibit 3. Assume the dividend yield for options with 1 year to maturity is 3.6% and for options with 2 years to maturity 2.6%. Exhibit 3 Listed American Options on Citigroup Stock on January 25, 2008 Expiration Option Strike Price Bid Ask Open Date Symbol Type (5 (S) (5) Interest VRN.AE Call 25 4.70 4.70 39.297 VRN.AF Call 30 17 Jan 2009 2.60 2.61 87,923 VRN.ME Put 25 3.40 3.45 69,211 VRN.ME Put 30 6.25 6.25 105.537 WRV.AE Call 25 6.40 19.821 WRV.AF Call 30 16 Jan 2010 4.15 4.45 44,015 WRV.ME Put 25 4.75 4.90 23,785 WRV.MF Put 30 7.90 49,501 6.10 7.55 No options with a longer maturity were listed. The bid price or 'bid' (ask price or ask") is the price received (paid) by option sellers (buyers). The open interest' for a given option is the number of options outstanding, i.e., the number of long positions (which equals that of short positions)