Today, is January 4, 2016. IBM common stock is selling at $135.95 per share. The stock has a dividend yield of 4% per year. The following table contains the monthly stock prices for IBM shares during the last 12 months.

Month (2015)

IBM Share Price

January

148.46

February

157.92

March

156.51

April

167.04

May

166.69

June

159.82

July

159.16

August

146.52

September

143.62

October

138.78

November

139.42

December

137.62

A call option with a March 18, 2016 expiration date and an exercise price of $130 is currently trading at $6.50. Each option entitles the holder to purchase 100 IBM shares. The risk-free rate is 0.58%, compounded continuously. Shares and options can only be bought and sold in whole numbers. Note that 2016 is a leap year.

b.Based on the market price of $6.50, derive the implied volatility on the IBM shares. You may use the BlackScholesMertonImpliedVolatility10e.xlsm file provided by the textbook's authors to derive the implied volatility. Take a screen shot of the answer provided in this Excel spreadsheet, and copy and paste it into your answer for this question. Obtain your answer to four decimal places (or two decimal places in percentage).(2 marks)