Question: Question 4 (20 marks) Consider an option on a non-dividend paying stock when the stock price is $100, the exercise price is $100 and the

Question 4 (20 marks) Consider an option on a non-dividend paying

Question 4 (20 marks) Consider an option on a non-dividend paying stock when the stock price is $100, the exercise price is $100 and the risk free rate is 10% per annum, the volatility is 20% per annum, and the time to maturity is 6 months. (a) Calculate the Black-Scholes price of the option if it is a European call? (8 marks) (b) Calculate the Black-Scholes price of the option if it is a European put? (8 marks) (c) Verify that the put call parity holds (4 marks)

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