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Please answer these questions completely from A to F. Thanks This question is about option valuation a) FM429's stock price is pound 110 and in

Please answer these questions completely from A to F. Thanks image text in transcribed
This question is about option valuation a) FM429's stock price is pound 110 and in each 3 month period will either increase by 25% or fall by 20%. A 6-month European call on FM429 stock has an exercise price of pound 90. The interest rate is 3% every 3 months. What is the value of the European call option on FM429? b) Suppose that at the end of month three, the FM429 stock price is pound 88. How at that point would you replicate an investment in the stock by a combination of the European call option and risk-free asset? c) What is the value of a 6-month European put option on FM429 with an exercise price of pound 90? d) Verify that put-call parity holds. e) What is the value of a 6-month American put on FM429 stock with an exercise price of pound 110? Would investors ever want to exercise this American put early? f) Now suppose that the stock, FM429. pays a dividend of pound 12 50 every three months. What is the value of a 6-month American call on FM429 with an exercise price of pound 90? Would you ever want to exercise this American call early

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