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Consider an option on a non-dividend paying stock when the stock price is $38, the exercise price is $40, the risk-free interest rate is 6% per annum, the volatility is 30% per annum, and the time to maturity is six months. Using Black-Scholes Model,
a) What is the price of the option if it is a European call?
b) What is the price of the option if it is a European put?
c) Show that the put-call parity condition holds (or does not hold)?
ANSWER WRITTEN OUT, NOT IN EXCEL
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