Compute the premium of a 4-month european put

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Reference no: EM131995154

A stock is currently priced at $20. In 4 months its price will either go down 10% or up 20%. The risk-free rate is 5% per annum with continuous compounding.

(a) Compute the premium of a 4-month European put with strike price $19.

(b) Use put-call parity to price a 4-month European call with strike price $19.

Reference no: EM131995154

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