Homework due Aug $12,202407$:$00$ CDT

Question $4$

$0\mathrm{.}0/15\mathrm{.}0$ points $($graded$)$

All assumptions of the Black$-$Scholes$-$Merton option pricing model hold. Stock XYZ is priced at $S_{xYZ}=$$$40.$ It has volatility $=25\%$ per year. The annualized continuously$-$compounded risk$-$free interest rate is $r=3\mathrm{.}5\%.$

Compute the price of a European call option with strike price $K=40,$ which matures in $6$ months.

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Compute the price of a European put option with the same strike price and the same maturity date using the put$-$call parity.

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