Consider an option on a 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.

(a) What is the price of the option if it is a European call or put based on the Black-Scholes-Merton model?

(b) What is the price of the option if it is an American call or put based on a two-period binomial model?