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What is the present value of the dividends

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Question - The current price of a stock is $326 and the annual standard deviation of the rate of return on the stock is 60%. The stock is expected to pay dividends of $2 in 1 months and $2 in 4 months.

An American call option on the stock has a strike price of $340 and expires in 0.5 years. The risk-free rate is 5% (continuously compounded).

What is the present value of the dividends?

What is the value of N(d1) in the Black-Scholes formula? Use Excel's NORM.S.DIST(d1, true) function

What is the value of N(d2)?

What should be the price (premium) of the call option?

Reference no: EM132954721

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