~~~In Excel~~~

Question 3. Consider a European option on a non-dividend-paying stock when the stock price is $30, the exercise price is $29, continuously compounded risk-free interest rate is 5%, volatility is 25% per annum, and time to maturity is 4 months (assume 4 months equals 120 days).

a. Find the value of a call option at strike price of $29 using the Black-Scholes option pricing model. Show all steps. (8)

b. Find the value of a put option at strike price of $29 using the Black-Scholes option pricing model. Show all steps. (8)

c. Show that put-call parity holds using the put and the call at strike price of $29. (you need to find the value of both sides of the put-call parity for this.) (8)

~~~In Excel~~~