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5 . ABC stock is trading at $ 1 0 0 , its annualized standard deviation is sigma A = 0 . 3 ,
ABC stock is trading at $ its annualized standard deviation is sigma A its mean is zero, and its continuous annual dividend yield is The annual riskfree rate is
a Determine the equilibrium prices of ABC American and European call and put options expiring in days using the BOPM Excel program. Subdivided your tree into n subperiods. Comment on what explains the differences you observe between the European and American call prices and the European and American put prices.
b Using the BOPM Excel program, determine the equilibrium prices of ABC American and European call and put options expiring in days given there are no dividends. Subdivided your tree into n subperiods.
c Explain the impact dividends have on American and European call and put prices.
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