What if the stock pays a dividend in one year

Reference no: EM131937000

Question: Assume Koco Ltd current stock price is $70. The American one-year call option on the stock is trading at $20 with strike price of $70. If the one-year rate of interest is 10% p.a. (continuously compounding), is the call price free from arbitrage, assuming that the stock pays no dividends? What if the stock pays a dividend of $5 in one year.

Reference no: EM131937000

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What if the stock pays a dividend in one year : Assume Koco Ltd current stock price is $70. The American one-year call option on the stock is trading at $20 with strike price of $70.

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