Question $5$

Consider an option on a non$-$dividend$-$paying stock when the stock price is $$30,$ the exercise price is $$29,$ the risk$-$free interest rate is $5\%$ per annum, the volatility is $25\%$ per annum, and the time to maturity is four months.

a$.$ What is the price of the option if it is a European call?

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

c$.$ Verify that put$-$call parity holds.

Question $5$

Consider an option on a non$-$dividend$-$paying stock when the stock price is $$30,$ the exercise price is $$29,$ the risk$-$free interest rate is $5\%$ per annum, the volatility is $25\%$ per annum, and the time to maturity is four months.

a$.$ What is the price of the option if it is a European call?

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

c$.$ Verify that put$-$call parity holds.