A stock has a price of $40. The risk-free interest rate is 7% per annum and the stock has volatility parameter of 28%. Consider a European call option on the stock for a strike price of $41 with expiration in 6 months. Let t be the current time and t + h an hour later. 

a. From time t to t + h, the price of the stock increases by 1%. What is the percentage change in the value of the call? Would the price of the put move by the same percentage?

b. From time t to t + h, the price of the stock decreases by 1%. What is the percentage change in the value of the call? Would the price of the put move by the same percentage?

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Here are the answers a If the stock price increases by 1 from 40 to 4040 The percentage change in th... View the full answer