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5 . ABC stock is trading at $ 1 0 0 , its annualized standard deviation is sigma A = 0 . 3 ,

5. ABC stock is trading at $100, its annualized standard deviation is \sigma A =0.3, its mean is zero, and its continuous annual dividend yield is 5%. The annual risk-free rate is 2.5%.
a. Determine the equilibrium prices of ABC American and European 100 call and put options expiring in 180 days using the BOPM Excel program. Subdivided your tree into n =100 sub-periods. 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 100 call and put options expiring in 180 days given there are no dividends. Subdivided your tree into n =100 sub-periods.
c. Explain the impact dividends have on American and European call and put prices.

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