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Consider an option on a non-dividend-paying stock when the stock price is $40, the exercise price is $39, the risk-free interest rate is 4% per

  • Consider an option on a non-dividend-paying stock when the stock price is $40, the exercise price is $39, the risk-free interest rate is 4% per annum, the volatility is 35% per annum, and the time to maturity is four months.
  • What is the price of the option if it is a European call?

What is the price of the option if it is an American call?

What is the price of the option if it is a European put?

Verify that putcall parity holds.

Compute the call and put delta.

Compute Theta for the call option.

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