Example: Consider a European call option on a stock with ex- dividends dates in two months and five months. The dividend on each ex-dividend is expected to be $0.5. The current stock price is $40, the exercise price is $40, the risk-free rate is 9% per annum, the volatility is 30% per annum, and time to maturity is six months. What is the value of the call option? Step 1:Calulate the present value of the dividends: $0.5 x e-0.0 -0.09x (2) + c) + $0.5 x e -0.09 x = $0.9741