What is the price of the option if it is a european call

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Reference no: EM131237620

Assume that the stock in Problem is due to go ex-dividend in 1 months. The expected dividend is 50 cents.
(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) If the option is an American call, are there any circumstances under which it will be exercised early?

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%, the volatility is 25% per annum, and the time to maturity is 4 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?

(d) Verify that put-call parity holds.

Reference no: EM131237620

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