The current price of a non-dividend-paying share is 8 and its volatility is thought to be 40% per annum. The continuously compounded risk-free interest rate is 5% per annum. A European call option on this share has a strike price of 6.50 and term to maturity of one year. a) Derive the Black-Scholes formula for pricing a European call options. (4 Marks) b) Calculate the price of this call option, assuming that the Black-Scholes model applies. (3 Marks) c) The market price for the option is actually 3. Show that the volatility of the share implied by the true market price of the option is 60% per annum, to the nearest 1% per annum. (3 Marks) The current price of a non-dividend-paying share is 8 and its volatility is thought to be 40% per annum. The continuously compounded risk-free interest rate is 5% per annum. A European call option on this share has a strike price of 6.50 and term to maturity of one year. a) Derive the Black-Scholes formula for pricing a European call options. (4 Marks) b) Calculate the price of this call option, assuming that the Black-Scholes model applies. (3 Marks) c) The market price for the option is actually 3. Show that the volatility of the share implied by the true market price of the option is 60% per annum, to the nearest 1% per annum