Show that if g is less than the risk free rate

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1. Suppose that the strike price of an American call option on a non-dividend-paying stock grows at rate g. Show that if g is less than the risk-free rate, r, it is never optimal to exercise the call early.

2. How can the value of a forward start put option on a non-dividend-paying stock be calculated if it is agreed that the strike price will be 10% greater than the stock price at the time the option starts?

Reference no: EM131240150

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