Estimate the value of the call and put options using the

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You are trying to value three-month call and put options on Merck, with a strike price of 30. The stock is trading at $28.75, and expects to pay a quarterly dividend per share of $0.28 in two months. The annualized riskless interest rate is 3.6%, and the standard deviation in ln stock prices is 20%. a. Estimate the value of the call and put options, using the Black-Scholes. b. What effect does the expected dividend payment have on call values? on put values? Why?

Reference no: EM13484340

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