21. A DECS contract pays two shares if ST < 27.875, 1.667 shares if the price is...
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21. 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 = \($26.70\), σ = 35%, r = 9%, and T = 3.3 and that the underlying stock pays a quarterly dividend of $0.10.
The next two problems are based on the M&I stock purchase contract.
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Related Book For
Derivatives Markets Pearson New International Edition
ISBN: 978-1292021256
3rd Edition
Authors: Robert L. Mcdonald
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