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Calculate the implied volatility of the call option

Assignment: The Dow Jones Industrial Average on August 15, 2008 was 11,660 and the price of the December 117 call was $3.50. Assume the risk-free rate is 4.2%, the dividend yield is 2% and the option expires on December 25 (options markets are closed the day after Christmas).

Q1: Use Derivagem to calculate the implied volatility of the call option.

Q2: Use put-call parity to estimate the no arbitrage price of a December 117 put.

Q3: Given the price determined in Q2, use Derivagem to calculate the implied volatility of the put option.

Q4: What do you conclude about put-call parity and implied volatility for European options

Adapted from Fundamentals of Futures and Options Markets, 6th ed., John C. Hull.

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## Q : Asset based valuation approach

In what type of industry could you most justify an asset based valuation approach? Why?