8.16. A nondividend-paying stock has a current price of $30 and a volatility of 20 percent per...

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8.16. A nondividend-paying stock has a current price of

$30 and a volatility of 20 percent per year.

(a) Use the Black-Scholes equation to value a European call option on the stock above with a strike price of $28 and time to maturity of three months.

(b) Without performing calculations, state whether this price would be higher if the call were American. Why?

(c) Suppose the stock pays dividends. Would otherwise identical American and European options likely have the same value? Why?

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Financial Markets And Corporate Strategy

ISBN: 9780071157612

2nd Edition

Authors: Mark Grinblatt, Sheridan Titman

Question Posted: Jul 23, 2024 08:02 AM

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8.16. A nondividend-paying stock has a current price of $30 and a volatility of 20 percent per...

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Financial Markets And Corporate Strategy

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