Problem 3 Your company has just written a one-year European put option on an equity index fund. The equity index fund is currently trading at 1000. It pays dividends contin- uously at a rate proportional to its price; the dividend yield is 2%. It has a volatility of 20%. The strike price of the put option is set in order to insure against a reduction of more than 40% in the value of the equity index fund at the end of one year. The continuously compounded risk-free interest rate is 2.5%. Using the Black-Scholes model, determine the price of the put option.