An American call option on a dividend paying stock when: the current stock price is $5.40.
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Question:
• the current stock price is $5.40.
• the exercise price is $6.00.
• the volatility is 30% p.a.
• the risk-free rate of interest (continuous compounding) is 10% p.a.
• the time to maturity is 6 months.
• the stock is expected to pay a certain dividend of $1 in 172 (one and one-half) months' time. (note that 1 month = /24 year.)
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