finance

The following information is given about options on the stock of a certain company. S_0 = 25 X = 20 r_c = 0.05 T = 0.25 sigma^2= 0.35 No dividends are expected. Answer the following questions: a. What value does the Black-Scholes-Merton model predict for the call? b. Suppose you feel that the call is overpriced. What strategy should you use to exploit the apparent misvaluation? c. How do you construct a riskless hedge, and calculate the number of puts per 100 shares purchased? Explain The following information is given about options on the stock of a certain company. S_0 = 25 X = 20 r_c = 0.05 T = 0.25 sigma^2= 0.35 No dividends are expected. Answer the following questions: a. What value does the Black-Scholes-Merton model predict for the call? b. Suppose you feel that the call is overpriced. What strategy should you use to exploit the apparent misvaluation? c. How do you construct a riskless hedge, and calculate the number of puts per 100 shares purchased? Explain