Question: 4 (a) State the six factors that affect the value of a call option according to the Black-Scholes formula, together with their relationship with the

4 (a) State the six factors that affect the value of a call option according to the Black-Scholes formula, together with their relationship with the call option price (e.g. the higher a factor, the higher/lower the call price is). (30% weighting) (b) What is the price of a European put option on a non-dividend-paying stock when the stock price is 60, the strike price is 65, the risk-free interest rate is 5% per annum, the volatility is 35% per annum, and the time to maturity is six months? (40% weighting) (c) Use the answer obtained in part (b) in conjunction with the Put-Call Parity Theorem to determine the price of a European call option on a non-dividend-paying stock when the stock price is 60, the strike price is 65, the risk-free interest rate is 5% per annum, the volatility is 35% per annum, and the time to maturity is six months. (

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