Question: Assume the Black-Scholes framework. You are given: (i) The current stock price is $82. (ii) The stocks volatility is 30%. (iii) The stock pays no

Assume the Black-Scholes
framework. You are given:
(i) The current stock price is $82.
(ii) The stock’s volatility is 30%.
(iii) The stock pays no dividends.
(iv) The continuously compounded risk-free interest rate is 8%.
Using the above information, you calculate the price of a 3-month 80-strike European call.
Immediately after your valuation, it is publicly announced that the stock will pay a
dividend of $6 in 1 month, and no other payouts over the life of the call. Using the BlackScholes methodology with the same volatility parameter of 30%, you recalculate the price
of the call.
Calculate the change in the price of the call.

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