Question: The putcall parity condition is altered when dividends are paid. The dividend-adjusted putcall parity formula is S edt + P = E eRt

The put–call parity condition is altered when dividends are paid. The dividend-adjusted put–call parity formula is

S × e−dt + P = E × e−Rt + C

Where d is again the continuously compounded dividend yield.

a. What effect do you think the dividend yield will have on the price of a put option? Explain.

b. From Problem 23.33(b), what is the price of a put option with the same strike price and time to expiration as the call option?

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