Explain carefully why Blacks approach to evaluating an American call option on a dividend paying stock may give an approximate answer even when only one dividend is anticipated Does the answer given by Blacks approach understate or overstate the true option value Explain your answer ...

Blacks approach in effect assumes that the holder of option must decide at time zero whether it is a ...

Explain carefully why Blacks approach to evaluating an American call option on a dividend-paying stock may give

Question:

Explain carefully why Black’s approach to evaluating an American call option on a dividend-paying stock may give an approximate answer even when only one is anticipated. Does the answer given by Black’s approach understate or overstate the true option value? Explain your answer. 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...