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2. Consider an option on a non-dividend-paying stock when the stock price is $75, the exercise price is $70, the risk-free interest rate is 5%

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2. Consider an option on a non-dividend-paying stock when the stock price is $75, the exercise price is $70, the risk-free interest rate is 5% per annum, the volatility is 30% per annum, and the time to maturity is three 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 an American call? c. What is the price of the option if it is a European put? d. Verify that put-call parity holds. 2. Consider an option on a non-dividend-paying stock when the stock price is $75, the exercise price is $70, the risk-free interest rate is 5% per annum, the volatility is 30% per annum, and the time to maturity is three 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 an American call? c. What is the price of the option if it is a European put? d. Verify that put-call parity holds

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