Question
For a European call-on-call option: (i) The price of the underlying stock is 45. (ii) The stocks annual volatility is 0.3. (iii) The continuous annual
For a European call-on-call option: (i) The price of the underlying stock is 45. (ii) The stocks annual volatility is 0.3. (iii) The continuous annual dividend rate is 2% (iv) The continuously compounded risk-free rate is 5%. (v) For the call-on-call option, the premium is 0.75, time to expiry is 3 months, and the strike price is 5. (vi) For the underlying call option, time to expiry is 6 months and the strike price is 45. (vii) Options are priced using the Black-Scholes formula. Determine the premium for a European put-on-call option with the same underlying asset and strike price.
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