Calculate the value of call and put options

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Consider an asset that trades at 100 today. Call and put options on this asset are available with an exercise price of 120. The option expires in 280 days, and the volatility is 0.25. The continuously compounded risk-free interest rate is 5%.

(i) Using Black-Scholes-Merton model, calculate the value of call and put options.

(ii) Calculate the value of the European call and put options using Black-Scholes-Merton model. Assume that the continuous dividend yield is 1.0%.

Reference no: EM133003876

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