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Suppose that IBMs stock price is $28, the strike price is $25, and the risk-free interest rate is 8% per annum. Assume that the stock

Suppose that IBMs stock price is $28, the strike price is $25, and the risk-free interest rate is 8% per annum. Assume that the stock does not pay any dividends.

Part (a) What is the lower bound for the price of a 4-month American call option on the IBM?

Part (b) What is the lower bound for the price of a 4-month European call option on the IBM?

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