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Consider a European call option on a stock when there are ex-dividend rates in two months and five months. The dividend on each ex-dividend date is expected to be $0.60 in two months and $0.45 in five months from today. Use the following characteristics as well and solve for Black-Scholes price of European Call and Put Options.
S=$40, K=$40, σ=30%, T=6 months, and r=9% annual continuously compounding.
a) What is the current price of the European call option?
b) What is the current price of the European put option?
c) Verify that put-call parity holds.
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You put $9,000 in an account earning 7%. After 3 years, you make another deposit into the same account. Five years later (that is, 8 years after your original $9,000 deposit), the account balance is $23,000. What was the amount of the deposit at the ..
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Suppose you have been hired as a financial consultant to Defense Electronics, Inc. (DEI), a large, publicly traded firm that is the market share leader in radar detection systems (RDSs). Calculate the project’s Time 0 cash flow, taking into account a..
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