Find pseudo-american option value

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Reference no: EM131561730

XYZ Corp. will pay a $2 per share dividend in 2 months. Its stock price currently is $76 per share. A call option on XYZ has an exercise price of $68 and 3-month time to expiration. The risk-free interest rate is 0.8% per month, and the stock’s volatility (standard deviation) = 16% per month. Find the pseudo-American option value. (Hint: Try defining one “period” as a month, rather than as a year.)

Reference no: EM131561730

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