Q: Use the Black-Scho les-Merton model to calculate the stock price, if The current stock price is 174. the exercise price is 174, the risk free interest rate (cc) is 5.71%, the stock's standard deviation is 21% and the option has 135 days (365 day year) to maturity. Given: d1 = 0.2292 d2 = 0.1015 N(dl) = 0.5907 Nd2) = 0.5404 The price of the call based on BSM = 10.7043 The hedge ratio = 0.5907 7 S K T in years) o r(cc risk free rate) 174 174 0.369863 0.21 0.0571 a) If the actual price of the call were 59.75, what strategy should you take? For consistency of analysis, assume that you will purchase or sell 1000 cals (10 contracts). This is where put-call parity comes in but only use calls and stocks for this one. * Use this formula: C+ Ke-rt=P+S b) Given your strategy in part a, what happens to the vabe of the calls if the price of the stock changes by $1