Find pseudo-american option value

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Reference no: EM131925628

XYZ Corp. will pay a $2 per share dividend in 2 months. Its stock price currently is $85 per share. A call option on XYZ has an exercise price of $75 and 3-month time to expiration. The risk-free interest rate is 0.7% per month, and the stock’s volatility (standard deviation) = 21% per month. Find the pseudo-American option value. (Hint: Try defining one “period” as a month, rather than as a year.)

Reference no: EM131925628

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