1.What is the difference between an American and a European style call option?
A)American call option makes money when the price goes either up or down, while the European only when the price goes higher.
B)*One can exercise a European call option only at maturity while an American can be exercised at any point in time
C)American call option can only be written on the shares listed in the USA, while European call option can be written for non-US listed stocks
D)European call option take you long the underlying security, while American call option takes you short.
2.The price of a European 2 year put option with a strike £56 on a stock DCBA is £5.60. Assume flat structure of interest rates at 1.5%.
What is the no-arbitrage value of European call option with the same maturity and strike price. Assume the stock DCBA is currently trading at £56.
A)7.24
B)3.96
C)6.43
D)5.60
