Find the pseudo-american option value

Assignment Help Financial Management

Reference no: EM132054495

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 $68 and 3-month time to expiration. The risk-free interest rate is 0.8% per month, and the stock’s volatility (standard deviation) = 16% per month. Find the pseudo-American option value. (Hint: Try defining one “period” as a month, rather than as a year.) (Round your answer to 2 decimal places. Omit the "$" sign in your response.)

Pseudo-American option value: $

Reference no: EM132054495

Questions Cloud

Greenly insurance company : Greenly has worked hard over the past year and has increased their marketing efforts to reach certain “untapped” demographics.

Equivalent annual annuity of most profitable project : Each project has a WACC of 9%. What is the equivalent annual annuity of the most profitable project?

Market value of firm before-after repurchase announcement : What is the market value of the firm before and after repurchase announcement? What is expected return on the equity of otherwise identical all-equity firm.

After tax and before tax costs for cost of preferred stock : calculate After Tax cost of debt but do not make any such distinction between after tax-before tax costs for cost of preferred stock or cost of common equity

Find the pseudo-american option value : 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.

What happens to the delta of the portfolio : What happens to the delta of the portfolio if the stock price becomes very small?

Calculate the value of call option on the stock : Calculate the value of a call option on the stock with an exercise price of $126.

Defined benefit plan to defined contribution plan : Why is it that over the past several years employers have been moving from a defined benefit plan to a defined contribution plan?

Purchase of new machine for production of latex : Vandelay Industries is considering the purchase of a new machine for the production of latex.

User Account

All Pages