PutCall Parity and Dividends The putcall parity condition is altered when dividends are paid. The dividend-adjusted putcall

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Put–Call Parity and Dividends 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 the previous question, 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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Corporate Finance With Connect Access Card

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Question Posted: Jul 10, 2024 08:01 AM

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PutCall Parity and Dividends The putcall parity condition is altered when dividends are paid. The dividend-adjusted putcall

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Corporate Finance With Connect Access Card

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