Use the following data to compute the option price for 3M: Stock price =100; Exercise price=90; Interest rate=5%; Time to expiration= 3 months; Standard deviation = 20% per year; assume zero dividends.
1) According to the Black-Scholes model, what price should we expect for the call option? What price should we expect for the put option?
2) If the call option above is selling for $8.00 is its implied volatility more or less than 20%?