In: Finance
A non-dividend-paying stock is trading at 72 and has volatility of 30% per annum. Consider an option on the stock with strike price $75 and maturity six months. The risk-free rate is 2% per annum (continuously compounded).
(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) What is the price of the option if it is an American call?
Part (a)
The price of the option is $6.531
The formula used are:
Part (b)
The price of the option is $8.784
The formula used are:
Part (c)
The price of the American Call option is $6.531
The formula used are:
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