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Consider an option on a non-dividend-paying stock when the

Consider an option on a non-dividend-paying stock when the stock price is $107, the exercise price is $102, 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?

3. What is the price of the option if it is a European put?

4. Verify that put call parity holds.

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Financial Management: Consider an option on a non-dividend-paying stock when the

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Financial Management: Consider an option on a non-dividend-paying stock when the

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