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On December 20, 2011, stock in Exxon Mobil was selling at 81.63. (a) Use the Black–Scholes…


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?