Black-Scholes Model Applied to Equities, suppose we are given the following information on an underlying stock and options: S = 60, X = 60, Rf = 2%, T = 0.25, dividend yield = 2%, = 45%. Assume we are examining European-style options. Three Questions:

1. The BSM model option value is the same as the previous problems because options are not dividend adjusted.
2. The BSM model option values will be different because there is an adjustment term applied to the exercise price, that is e^- (div yield) (t), which will influence the option values.
3. The BSM model option value will be different because d1, d2, and the stock component are all adjusted for dividends.