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1. A stock price is currently $45. It is known that at the end of one month it will be either $42 or $38. The

1. A stock price is currently $45. It is known that at the end of one month it will be either $42 or $38. The risk-free interest rate is 10% per annum with continuous compounding. What is the value of a one-month European call option with a strike price of $39?

A. 6.35 B. 5.96 C. 6.52 D. 5.99 E. 5.49

2. A stock price is currently $40. It is known that at the end of one month it will be either $42 or $38. The risk-free interest rate is 8% per annum with continuous compounding. What is the value of a one-month European call option with a strike price of $40?

A. 1.25 B. 1.19 C. 1.13 D. 1.87

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