For a stock index, S $100, 30 , r 5 , 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, 30 , r 3 , and 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

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

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 and for the interest rate and yield.) Value both options again. What do you notice?

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