# Question: For a stock index S 100 30

For a stock index, S = $100, σ = 30%, r = 5%, δ = 3%, and T = 3. Let n = 3.

a. What is the price of a European call option with a strike of $95?

b. What is the price of a European put option with a strike of $95?

c. Now let S = $95, K = $100, σ = 30%, r = 3%, and δ = 5%. (You have exchanged values for the stock price and strike price and for the interest rate and dividend yield.) Value both options again. What do you notice?

a. What is the price of a European call option with a strike of $95?

b. What is the price of a European put option with a strike of $95?

c. Now let S = $95, K = $100, σ = 30%, r = 3%, and δ = 5%. (You have exchanged values for the stock price and strike price and for the interest rate and dividend yield.) Value both options again. What do you notice?

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