A stock has a current price of $57. An option on this stock that expires in seven months has an exercise price of $55. The stock will pay a dividend of $2 in four months. Assume an annualized volatility of 25% and a continuously compounded risk-free rate of 5% per annum. Use the Black-Sholes-Merton model to price this option.

(In all your calculations, round the numbers to 4 decimal places.)

1) Suppose the option is a European put. Calculate the value of the put.

$

2) Suppose this option is an American call. Use Blacks approximation to calculate the value of this call.

$