Consider an option on a non-dividend-paying stock when the, Ask an Expert

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Consider an option on a non-dividend-paying stock when the stock price is $30, the exercise price is $29, the risk-free rate is 5% per annum, the volatility is 25% per annum, and the time to maturity is four months. Use 2-step, 3-step, 4-step, 5-step binomial option pricing model.

a) What is the price of the option if it is a European call?

b) What is the price of the option if it is a European put?

c) Verify the put-call parity holds.

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Financial Management, Finance

Category:- Financial Management
Reference No.:- M92724963

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