A stock index currently stands at 300 and has a volatility of 20%. The risk-free interest rate is 8% and the dividend yield on the index is 3%.

(a) Use the Black-Scholes-Merton formula to calculate the price of a six-month European call option with strike price 325 and the price of six-month European put option with strike price of 275.

(b) What is the cost of the range forward created using options in Part (a)?

(c) Use a two-step binomial tree to evaluate a six-month American put option on the index with a strike price of 300.