Find the value of european put option

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Reference no: EM131926995

a. Use the Black-Scholes formula to find the value of a European put option on the following stock:

Time to Maturity: 12 months

Standard Deviation: 25% per year

Exercise Price: $40

Current Stock Price: $40

Interest rate: 4% per year

b. If the option in question were an American put option instead of a European put option, would it have a higher or lower price than the European put option? Why?.

Reference no: EM131926995

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