Question 2 [25 marks] When answering each question, state any additional assumptions you may need to make. Show all working/calculations.

(c) Consider a European call option and a European put option on the same underlying as- set (non-dividend paying). Both options have the same exercise price and mature on the same date in one year. Both options are currently at-the-money. Which option has the higher value? Explain, mathematically stating any assumptions you have made. [5 marks]