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Q1. A stock that is priced at $3,810 today has an implied volatility of 18.3%. The continuously compounded risk- free interest rate is 6.5% per

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Q1. A stock that is priced at $3,810 today has an implied volatility of 18.3%. The continuously compounded risk- free interest rate is 6.5% per annum. (a) (i) Determine the theoretical price of a European call option on the stock using the Black-Scholes-Merton (BSM) model. The call option has a strike price of $3,725 and 6 months of remaining life before expiration. (10 marks)

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