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A stock is currently traded for $135. The risk-free rate is 0.5% per year (continuously compounded...

A stock is currently traded for $135. The risk-free rate is 0.5% per year (continuously compounded APR) and the stock’s returns have an annual standard deviation (volatility) of 56%. Using the Black-Scholes model, we can find prices for a call and a put, both expiring 60 days from today and having strike prices equal to $140.

(a) What values should you use for S, K, T−t, r, and σ in the Black-Scholes formula?

S =

K =

T - t =

r =

σ =

(b) Find the d1 and d2 to be used in the Black-Scholes formula.

d1 =

d2 =

(c) Using these d1 and d2, find the call price Ct and put price Pt according to the Black-Scholes formula.

Ct =

Pt =

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