A stock price is currently \\( \\$ 100 \\). Over each of the next two...
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A stock price is currently \\( \\$ 100 \\). Over each of the next two six-month periods it is expected to go up by \10 or down by \10. The risk-free interest rate is \8 per annum with continuous compounding. 1. What is the value of a one-year European call option with a strike price of \\( \\$ 100 \\) ? 2. What is the value of a one-year European put option with a strike price of \\( \\$ 100 \\) ? 3. Verify that the European call and European put prices satisfy put-call parity
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A stock price is currently \\( \\$ 100 \\). Over each of the next two six-month periods it is expected to go up by \10 or down by \10. The risk-free interest rate is \8 per annum with continuous compounding. 1. What is the value of a one-year European call option with a strike price of \\( \\$ 100 \\) ? 2. What is the value of a one-year European put option with a strike price of \\( \\$ 100 \\) ? 3. Verify that the European call and European put prices satisfy put-call parity 