A DECS contract pays two shares if ST 27 875, 1 667 shares if the price is above ST 33 45, and $27 875 and $55 75 otherwise The quarterly dividend is $0 87 Value this DECS assuming that S $26 70, 35 , r 9 , and T 3 3 and that the underlying stock pays a quarterly dividend of $0 10 The next two prob...

Suppose a DECS Debt Exchangeable for Common Stock contract p ...

A DECS contract pays two shares if ST < 27.875, 1.667 shares if the price is above

Question:

A DECS contract pays two shares if ST < 27.875, 1.667 shares if the price is above ST > 33.45, and $27.875 and $55.75 otherwise. The quarterly is $0.87. Value this DECS assuming that S = $26.70, σ = 35%, r = 9%, and T = 3.3 and that the underlying stock pays a quarterly of $0.10.
The next two problems are based on the M&I stock purchase contract. Dividend
A dividend is a distribution of a portion of company’s earnings, decided and managed by the company’s board of directors, and paid to the shareholders. Dividends are given on the shares. It is a token reward paid to the shareholders for their...