Spot Price: RM25

Strike Price: RM25

Time to maturity: 1 year

Risk free rate: 5%

Standard Deviation of stock: 0.10

Bonds coupon (interest rate): 5%

Probability of price to go up: 15%

Probability of price to go down: 5%

Find:

1. Black and Scholes call and put prices
2. Put call parity theorem for Black and Scholes model
3. After 6 months, you intend to sell off your call option because you heard in the grapevine that the price will depreciate in the future. What is the price of that call option?
4. Binomial single period call and put prices

Put call parity theorem for Binomial model