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Consider an option on a non-dividend-paying stock when the stock price is $30, the exercise price is $29, the risk-free interest rate is 5% per

Consider an option on a non-dividend-paying stock when the stock price is $30, the exercise price is $29, the risk-free interest rate is 5% per annum, the volatility is 25% per annum, and the time to maturity is four months.

Use 1-step binomial option pricing model (BOPM).

1. What is the price of the option if it is a European call?

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

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