Question 4 (25 marks) You are currently heavily invested in compagnie Financire Richemont SA. You are of the belief that Compagnie Financire Richemont SA is not expected to increase dramatically over the next 4 months and you are interested in using a covered call strategy to take advantage of the limited upside and a achieve an increase your overall portfolios return. Use the information in the table below as well as the tables at the end of the paper to answer (A) and (B). 7 Share Price Today Exercise Price Risk Free Rate Dividend Yield Variance Months until Expiration R3601.37 R3700 7% 2.4% 0.144 5 A) Using the the information provided, calculate the value of the out-the-money call option using the Black-Scholes option pricing model. (18 Marks) B) Calculate the payoff of the covered call strategy if the share price ends up being R3781.44 (7 marks) Question 4 (25 marks) You are currently heavily invested in compagnie Financire Richemont SA. You are of the belief that Compagnie Financire Richemont SA is not expected to increase dramatically over the next 4 months and you are interested in using a covered call strategy to take advantage of the limited upside and a achieve an increase your overall portfolios return. Use the information in the table below as well as the tables at the end of the paper to answer (A) and (B). 7 Share Price Today Exercise Price Risk Free Rate Dividend Yield Variance Months until Expiration R3601.37 R3700 7% 2.4% 0.144 5 A) Using the the information provided, calculate the value of the out-the-money call option using the Black-Scholes option pricing model. (18 Marks) B) Calculate the payoff of the covered call strategy if the share price ends up being R3781.44 (7 marks)