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Assume sigma=0.15, nu=0.10, and current stock price $32. Monthly interest rate is 1%. Compute present values of the following options expiring in 3 months. (a) A European call option with strike $30, assuming $2 dividend in 40 days. (non recombining dividend tree). (b) European put option with strike $31, assuming no dividends. (c) American put option with strike $31, assuming no dividends.

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Financial Management, Finance

Category:- Financial Management
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