Question: Complete the following table using the following information: Column 1 reports six strike prices $150 to $175 at $5 intervals. Column 2 is

Complete the following table using the following information:

• Column 1 reports six strike prices $150 to $175 at $5 intervals.

• Column 2 is for the closing stock price on YBM, $160.

• Column 3 is for the risk-free interest rate r = 10 percent per year.

• Column 4 is for the time to maturity, which is twenty days (20/265 = 0.054795 years).

• Column 5 reports European call option prices from the market.

• Column 6 reports the implied volatility that you need to calculate.

150 155 160 165 170 175 Implied Volatilities CMktImplied Volatility 13.00 8.00

Comment on what this implies about the validity of the Black–Scholes–Merton model?

150 155 160 165 170 175 Implied Volatilities CMktImplied Volatility 13.00 8.00 3.75 1.00 0.20 0.05

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