Consider a european call option on a stock when there are, Ask an Expert

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Consider a European call option on a stock when there are ex-dividend rates in two months and five months. The dividend on each ex-dividend date is expected to be $0.60 in two months and $0.45 in five months from today. Use the following characteristics as well and solve for Black-Scholes price of European Call and Put Options.

S=$40, K=$40, σ=30%, T=6 months, and r=9% annual continuously compounding.

a) What is the current price of the European call option?

b) What is the current price of the European put option?

c) Verify that put-call parity holds.

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Financial Management, Finance

Category:- Financial Management
Reference No.:- M92335801

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