Let = $100, = $100, = 30%, = 0.08, = 1, and = 0. Let = 10. Suppose the stock has an expected return of 15%. a. What is the expected return on a European call option? A European put option? b....

Let

= $100,

= $100,
= 30%,

= 0.08,

= 1, and

= 0. Let
= 10. Suppose the stock has an expected return of 15%.

a. What is the expected return on a European call option? A European put option?

b. What happens to the expected return if you increase the volatility to 50%?