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Question 11 You are given the following information about the stock of Company ABC: Share price $80 risk free rate of interest is 6%, time

Question 11

You are given the following information about the stock of Company ABC: Share price $80 risk free rate of interest is 6%, time to expiration is 6 months, annualised standard deviation is 0.5 and exercise price is $85.

i. Calculate the appropriate call value of the stock according to the Black-Scholes option pricing formula. (Show your workings in full)

ii. Calculate an appropriate put premium. (Show your workings in full)

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