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(35%: Part a 15%; Part b 10%; Part 10%) Problem 1 Stock Options Let S S 100, K S 120, -30%, r-0.08, an16-0 for a stock. a. Compute the Black Scholes call price and put price for 1 year to maturity. b. compute the Black-Scholes call prices for 1 year to maturity and for a variety of very long times to maturity calls (e.g, 2,5 10, 50, 100 and 500 years). Make a table for these calls with their years to maturity and option prices. What happens to the option price as T--? (You don't need to show calculations for each call ) c. Set 6-0.001. Repeat part b. Now what happens to the option price as T- what accounts for the difference? (35%: Part a 15%; Part b 10%; Part 10%) Problem 1 Stock Options Let S S 100, K S 120, -30%, r-0.08, an16-0 for a stock. a. Compute the Black Scholes call price and put price for 1 year to maturity. b. compute the Black-Scholes call prices for 1 year to maturity and for a variety of very long times to maturity calls (e.g, 2,5 10, 50, 100 and 500 years). Make a table for these calls with their years to maturity and option prices. What happens to the option price as T--? (You don't need to show calculations for each call ) c. Set 6-0.001. Repeat part b. Now what happens to the option price as T- what accounts for the difference

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