a. What are the assumptions behind the Black-Scholes-Merton model? b. Compute the price of a European...
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a. What are the assumptions behind the Black-Scholes-Merton model? b. Compute the price of a European call option on a non-dividend-paying stock with the strike price is $70 when the stock price is $73, the risk-free interest rate is 10% pa, the volatility is 40% pa, and the time to maturity is 6 months? c. Without using the Black-Scholes model, compute the price of a 6 month European put on the same stock in b) with strike price of $70. a. What are the assumptions behind the Black-Scholes-Merton model? b. Compute the price of a European call option on a non-dividend-paying stock with the strike price is $70 when the stock price is $73, the risk-free interest rate is 10% pa, the volatility is 40% pa, and the time to maturity is 6 months? c. Without using the Black-Scholes model, compute the price of a 6 month European put on the same stock in b) with strike price of $70.
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