1. The S&P 200 index currently stands at 6000 points and has a volatility of 20% per annum. The risk free interest rate is 8% per annum and the index provides a dividend yield of 3% per annum, both with continuous compounding. Using the BlackScholes model, calculate the value of a three month European put with an exercise price of 5900.
2. Without using the B-S model, calculate the corresponding three-month call option price of this index.
3. Who would be interested in buying the put option illustrated in part (a)?