This question is based on the following information on the Black-Scholes (BS) model.

index level = 2107

exercise price = 2180

time to option maturity = 0.36 years

continuously compounded risk-free rate = 5%

estimated continuously-compounded dividend yield on the index = 4% per year

estimated index return standard deviation = 15%

Based on the above input, what is the European put price using the BS model?

A.

$98.45.

B.

$107.69.

C.

$112.03.

What is the BS put hedge ratio?

A.

-0.6141.

B.

-0.3859.

C.

0.3859.

What is the risk neutral probability that this put option finishes in-the-money?

A.

0.3520.

B.

0.3859.

C.

0.6480.

If the market put price is $2 higher than the BS price, assume that volatility is estimated correctly, what can we conclude about the estimated dividend yield?

A.

It's too high.

B.

It's too low.

C.

It's correctly estimated.