9. Assume K = $40, = 30%, r = 0.08, T = 0.5, and the stock
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9. Assume K = $40, σ = 30%, r = 0.08, T = 0.5, and the stock is to pay a single dividend of $2 tomorrow, with no dividends thereafter.
a. Suppose S = $50. What is the price of a European call option? Consider an otherwise identical American call. What is its price?
b. Repeat, only suppose S = $60.
c. Under what circumstance would you not exercise the option today?
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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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