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?