Question
In: Finance
) Consider an option on a non-dividend-paying stock when the stock price is $30, the exercise...
) Consider an option on a non-dividend-paying stock when the stock price is $30, the exercise price is $28, the risk-free interest rate is 5% per annum, the volatility is 30% per annum, and the time to maturity is four months.
(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 an American call?
(c) What is the price of the option if it is a European put?
(d) Verify that put–call parity holds.
Solutions
Expert Solution
Ans
a. $ 3.8108
b. $ 3.8108
c.$1.3485
d. PCP hold good price of put at t=0 is $ 1.3485 (round off )
jeff jeffy answered 1 year agoRelated Solutions
Consider an option on a non-dividend-paying stock when the stock price is $30, the exercise price...
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.
1. What is the price of the option if
it is a European call?
2. What is the price of the option if
it is an American call?
Consider an option on a non-dividend-paying stock when the stock price is $30, the exercise price...
Consider an option on a non-dividend-paying stock when the stock
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rate is 5% per annum, the volatility is 25% per annum, and the time
to maturity is four months.
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