Assume K = $40, = 30%, r = 0.08, T = 0.5, and the stock is
Question:
a. Suppose S = $50. What is the price of a European call option? Consider an otherwise identical American call. What is its price?
b. Repeat, only suppose S = $60.
c. Under what circumstance would you not exercise the option today? Dividend
A dividend is a distribution of a portion of company’s earnings, decided and managed by the company’s board of directors, and paid to the shareholders. Dividends are given on the shares. It is a token reward paid to the shareholders for their...
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a To be very exact we would have to discount tomorrows dividend However PV Div 2 exp008 1360 19996 2 ...View the full answer
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