You know that a call will finish in-the-money. Based on that single piece of information, you also know which one of the following? a) b. The risk-free rate is zero percent. 3) The stock price will equal the strike price at expiration. A put on the same underlying asset with the same strike and expiration will finish out-of-the-money. The strike price will exceed the stock price at expiration. e)) The price of the call is equal to the price of the put Which one of the following situations will produce the highest call price, all else constant? a) b) c) d) 4) $29 stock price; $30 strike price $41 stock price; $40 strike price $20 stock price; $20 strike price $34 stock price; $35 strike price $24 stock price; $25 strike price e) one of the following statements is correct? Both call and put option deltas are always positive. b) Put option deltas are always positive. Call option deltas are always positive. Both call and put option deltas are always negative. All deltas can be positive, negative, or equal to zero. c) d) e) Answers the following problems in separate sheets. Also, Problem 1 (40 points) A company that does not pay dividend is selling for $50.34. Suppose that you want to value an option on this company with strike price of S53.00. The option matures in 6 months, the current risk-free is 40% and the company's return standard deviation (volatility) is 40%. 1) Assuming that you are valuing a call option, answer the following questions a) is the call option in the money (ITM) or out of the money (OTM)? Explain b) Find the price of the call option. c) Find both the intrinsic value and the time value of this call option 2) Now, assuming that you are valuing a put option, answer the folowing questions Is the put option in the money (ITM) or out of the money (OTM)? Explain Find the price of the put option. Find both the intrinsic value and the time value of this put option a) b) c) Black-Scholes-Merton formulas to calculate prices of European options: d,:: ln(S0/K) + (r+2/2)T where Co.oy + e.te3x is d4 520 543 N(-z) -1-N(z)