Problemconsider an option on a non-dividend-paying stock, Ask an Expert

Finance

Problem:

Consider an option on a non-dividend-paying stock when the stock price is $30, the exercise price is $29, the risk-free interest rate is 5% per annum, the volatility is 25% per annum, and the time to maturity is four months.

Required:

Question 1: What is the price of the option if it is a European call?

Question 2: What is the price of the option if it is an American call?

Question 3: What is the price of the option if it is a European put?

Question 4: Verify that put-call parity holds.

Note: Please explain comprehensively and give step by step solution.

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Basic Finance, Finance

Category:- Basic Finance
Reference No.:- M91149311

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