You are considering purchasing a call option with a current stock price of $60 and an exercise price of $62, the option has 91 days to maturity (use a 365 day base), the yearly risk free rate is currently 2% and the volatility for the option is 0.3

c = S₀N(d₁) - Ke^-rtN(d₂) p = Ke^-rt N(-d₂) - S₀N(-d₁) c + Ke^-rT = p + S

3. Verify that the put call parity relationship holds for these two options.

4. What initial investment is required for a delta hedged portfolio (assume one option)?

5. Calculate the overnight profit or loss on the delta hedged portfolio if the stock price increases to $64 and if it decreases to $56.