Discuss some other approach to value this option

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Question - Consider an option on a non-dividend-paying stock when the stock price is $29, the exercise price is $30, the risk-free interest rate is 5% per annum, the volatility is 25% per annum, and time to maturity is five months. Notes: Keep four decimal points for d1 and d2. Use the Table for N(x) with interpolation in calculating N(d1) and N(d2).

a. If it is an American put, can you use the Black-Scholes-Merton Model to calculate the price? If not, briefly discuss some other approach to value this option.

b. If this is a European call and there is a dividend of $1.50 expected in two months, what is the price of the option?

c. If this is a European call and there is a dividend of $1.50 expected in six months, what is the price of the option?

Reference no: EM132982768

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