The shares of DCB Bank are currently valued at $21 and they have a volatility of 19% pa. The risk free rate is 6% pa. You many find this table showing the values of the standard normal cumulative distribution function useful.

a)Calculate the price of a European call option on these shares, with strike price $27 and a term to expiration of 6 years. Give your answer in dollars and cents to the nearest cent.

Price of call option = $

DCB bank have just announced that a dividend of $0.78 will be paid in 2 years time and an additional dividend of $1.36 will be paid in 4 years time.

b)Taking this new information into account, calculate the adjusted price of the call option. Give your answer in dollars and cents to the nearest cent and assume that the time between the ex-dividend date and actual payment of the dividend has a negligible effect.

Adjusted price of call option = $

HINT: This question does not interpolate values from the standard normal cumulative distribution. For this particular question, when looking up z values from the distribution, first round your calculated value of z to two decimal places and then use that rounded z value to find F(z).

Standard normal cumulative distribution function This table gives values of the standard normal cumulative distribution function, FC2), for certain values of 2. That is the table gives the area under the standard sormal prabay density function from negative infinity to z. Note that the identity FC) = 1 - Fel can be used for negative values of you would help in using this table, some instructions have been provided (show instructions) (2) - Standard normal cumulative distribution function + 0.00 0.0 02.05 . B. a.se 0.00 0.0000 0.5079 50 GSIS 145356 0.157003 ...SON 55572 ST S. 5750 5753 0265794225 550 0.50 0.0 0.0 0.0 0.0 0.615 61409 417 0.62172 0.02. To set . . $123 0.4545542.690 63 DO 4 D. GORGO 679 0.5 0.694976:69647 670094 0.79540.704.71225 671566 2204 2240 s 2575 2.7207 0.722 756 755 754 6.500 6.750 751 225 1234 .. 78 79000 790097907 .79955094 395.75 0 31 4.9 G.13943589 0.821382381.29 0.206 30 9399 2.9954583993 1. EM 07514646 50 500 650 65169.93 6362 1 GOD SO ON D 7000 413 2 OS. GS GS 26.04 13 02 01. 04. 2:54 55 574 LA 91 92073 6.92220 870 0.92507 27652715 52922 0.93055 93389 LS 6930193348 093576 0.93096.3822-995054062 0949 509548 16:4520 60.06.2003 525 525 1307.626 72.925 69 697002 1972 193 7252 657329 0.57381 16.750 97558 755 950 2.0 0.37725 0.77 0.32.782.000.000 2.2.2 2.2 MID MASSETTES 2.3 .99928 0.9995699983 09901 0.9907599061 990 99119936.9915 2.4 0.920299224 225 2265 990 990 99324493939936 25 LS 430 9323520 2.6 699534.995.90 6.99573 0.92585 ... 6.632 6.95643 2.7 ) HOT 720 729 28.91752...377.995.980.90 2. . . . . . . . . . . 3.0 6 997 999 9999699900 1.00 903.9994999 32 03.2003. . . . . . . 33 52 53.90 . . . . . . 1.4 90 998 209 0.9997 0.99971999999999756.99975 3.5 1.99977 6.99978 6.999756.99999699900 9900 9998199982 6.9995399963 3.6 0.9 0.906.09.2009 3.7 . . . . . . . . 3. . . . . . . . . 2.999999999999999999999999999999999999999999999997