Question: (We repeat the previous question allowing for nonzero dividends.) Assume a stock has a dividend yield of d = 2%. Compute the three-month (T =

(We repeat the previous question allowing for nonzero dividends.) Assume a stock has a dividend yield of d = 2%. Compute the three-month (T = 1/4) forward price F of a stock currently trading at $40 when the risk-free rate for this period is r = 4%. Then, set the strike price K = F and calculate call and put values from the Black-Scholes model if the volatility is σ = 0.4. What can you say about the call and put prices you just computed?

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Compute the three-month (T = 1/4) forward price F of a stock currently trading at $40 when the risk-free rate for this period is r = 4%. Then, set the strike price K = F and calculate call and put values from the Black-Scholes model if the volatility is σ = 0.4, assuming the stock pays no dividends. What can you say about the call and put prices you just computed?

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