Assignment:
A stock price is $40. A six-month European call option on the stock with a strike price of $30 has an implied volatility of 35%. A six-month European call option on the stock with a strike price of $50 has an implied volatility of 28%. The six-month risk-free rate is 5% and no dividends are expected. Explain why the two implied volatilities are different. Use DerivaGem to calculate the prices of the two options. Use put-call parity to calculate the prices of six-month European put options with strike prices of $30 and $50. Use DerivaGem to calculate the implied volatilities of these two put options.