Consider an option on a non-dividend-paying stock when the stock price is $30, the exercise price is $29, the risk-free rate is 5% per annum, the volatility is 25% per annum, and the time to maturity is four months. Use 2-step, 3-step, 4-step, 5-step binomial option pricing 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) Verify the put-call parity holds.