Q-3 (25p) Consider a European put option on a dividend paying stock CCC. Current stock price is $60, the exercise price is 58, the risk-free interest rate is 5% p.a., the volatility is 30% p.a., and the time to maturity is three months. Lets assume that the CCC stocks ex-dividend is in 2 months. Expected dividend is $0.90. (we discussed the meaning of ex-dividend day in class. Think that dividend will be paid in 2 month)

1. What is the European put option value/price now?

2. If the company had been paying $1.25 dividend instead of $0.90, do you think the put value you found would be higher or lower? Why? (NO CALCULATION, just explanation in one-two sentences!)