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Problem 5 Consider a six-month European put option on a stock with a strike price...

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Problem 5 Consider a six-month European put option on a stock with a strike price of $32. The current stock price is $30 and over the next six months it is expected to rise to $36 or fall to $27. The risk-free interest rate is 6% per annum. (a) What is the risk-neutral probability of the stock rising to $36? (b) What is the value of the European put option? (c) Consider an "As you like it" option as follows. This option can be declared, after six months, by the option holder to be either a European call or a European put. Find the value of this "as you like it" option

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