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please help Stock price=18 Strike price=20 Time to maturity=6 months Volatility=30% per annum RF Interest Rate=10% Two dividends of 40 cents each, with one at
please help
Stock price=18
Strike price=20
Time to maturity=6 months
Volatility=30% per annum
RF Interest Rate=10%
Two dividends of 40 cents each, with one at 2 months and the other at 5 months
Based on this information, value the following:
1. American call using Black-Scholes-Morton model:
2. When should you exercise the above American call, and why?
3. The dividend is now 60 cents with everything else the same. When should you exercise the American call, and why? What is the value of the American call now?
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