Question: Question 4 (15 marks) The Lo Lu Plc's stocks are currently trading at $215 per share. Over each of the next two six-month periods it

Question 4 (15 marks) The Lo Lu Plc's stocks are currently

Question 4 (15 marks) The Lo Lu Plc's stocks are currently trading at $215 per share. Over each of the next two six-month periods it is expected to go up by 12% or down by 8%. The risk-free interest rate is 2% per annum with continuous compounding. [note: don't have to show the binomial tree) (i) What is the price of a six-month at-the-money European put option on this stock? (8 marks) [Enter your answer here] (4 marks) (ii) What is the price of a six-month at the money European call option on this stock? [Enter your answer here] (3 marks) (iii) Verify that the European call and European put prices satisfy put-call parity. [Enter your answer here]

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