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A non dividend paying stock has the following details for its European option:

Time to expiry – 1 year, Risk free interest (Continuous)- 5%, Exercise price = 42, Current Stock Price = 40, Call option=3.45

What are the likely price range for the equivalent American Options (Call and Put)?

The answer is Call range 3.45 ≤ C ≤ 5.4, Put range 3.4 ≤ P ≤ 5.45

How to arrive at the solution?

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