Q7

A non-dividend paying stock's current price is $45 and its volatility is 10% per annum. The risk-free rates are 2% per annum (continuously compounded) for all maturities. a) Calculate the Black-Scholes-Merton option price of a 6-month at-the-money European put option. (2 marks) b) Use the put-call parity to derive the price of the European call option on the same stock, with the same maturity and having the same strike price. (1 mark) c) What are the deltas for the European put and call options in questions A and B? (2 marks)