Purchase of LVMH's stock in Gucci by PPR, September 10, 2001:

1. PPR agreed to purchase ½ of LVMH's holdings of Gucci for $94 a share.

2. Gucci will pay an extraordinary dividend of $7 per share to non-LVMH shareholders in 3 months time.

3. PPR is offering non-LVMH shareholders a put option with a strike price of $101.50 and a maturity date of March, 2004.

4. The US ADR closed at $87.53 after this news was released:

Question 1: This put option was valued at $21 by one analyst. Assuming that: T= 2.5 years and r(risk-free) = 5% What was the implied volatility of Gucci shares?

Question 2: Given the extraordinary dividend and the put option, what is the minimum return that an investment in Gucci shares will earn over the next 2.5 years?