QUESTION 3 (100 marks) Consider the Black-Scholes-Merton option pricing formula: -rT c = SN(d) Ke N(d) p= Ke-TN(-d) - SoN(-d) 0 In(So/K)+r+ T where, d OT In(So/K)+(r- 2 and d d - oT OT a. Critically discuss the moneyness (i.e., in-the-money, out-of-the-money, and at-the- money) of call and put options. (60 marks) b. Explain the relationship of r with the price of call and put options. (40 marks) = =