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Rebecca is interested in purchasing a European call on a hot new? stock, Up, Inc. The call has a strike price of $97.00 and expires in 88 days. The current price of Up stock is $123.87?, and the stock has a standard deviation of 40% per year. The? risk-free interest rate is 6.14% per year. Up stock pays no dividends. Use a? 365-day year.
a. Using the? Black-Scholes formula, compute the price of the call.
The price of the call is: $ ____
b. Use? put-call parity to compute the price of the put with the same strike and expiration date.
The price of the put with the same strike and expiration date is: $ ____
?(Note?: Make sure to round all intermediate calculations to at least five decimal? places.)
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