Question: Assume the Black-Scholes framework. You are given: (i) The current price of a nondividend-paying stock is 80. (ii) The stocks volatility is 30%. (iii) The

Assume the Black-Scholes framework. You are given:

(i) The current price of a nondividend-paying stock is 80.

(ii) The stock’s volatility is 30%.

(iii) The continuously compounded risk-free interest rate is 8%.

(a) Calculate the price of a 1-year knock-out European put option with a barrier of 75 and a strike of 70.

(b) Calculate the price of a 1-year knock-in European put option with a barrier of 75 and a strike of 70.

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