Consider an option on a non-dividend paying stock when the stock price is $30, the exercise price is $28, the annual risk-free interest rate is 5%, the annual volatility is 25%, and the time to maturity is 6 months. Show the details of your hand calculations.

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? Verify the put-call parity.

c) What happens to the price of a European call when the exercise price is higher? What about a European put? Verify your answers for the exercise price of $32.