Financial Derivatives

1. A stock's price is $40. Over each of the next two three month periods it is expected to go up or down by 20%. The risk free rate is 6% p.a.

a. What should be the current price of a 6-month European style put option with a strike price of $45?

b. What should be the current price of a 6-month American style put option with a strike price of $45?

c. What should be the current price of a 6-month European style call option with a strike price of $35?

d. What should be the current price of a 6-month American style call option with a strike price of $35?