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Compute the value of call

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Question: On December 20, 2011, stock in Exxon Mobil was selling at 81.63.

(a) Use the Black-Scholes formula to compute the value of an April 12 call (t D 0:3123 years) with strike 70, assuming an interest rate of r = 0.01 and the volatility σ = 0.26. The volatility here has been chosen to make the price consistent with the bid-ask spread of (12.6,12.7).

(b) Is the price of 1.43 for a put with strike 70 consistent with put-call parity?

Reference no: EM131754164

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