S0 = 23 X = 20
rc = 0.09 T = 0.5
2 = 0.15
No dividends are expected.
What value does the Black-Scholes-Merton model predict for the call? (Due to differences in rounding your calculations may be slightly different. "none of the above" should be selected only if your answer is different by more than 10 cents.)
a. 5.35b. 1.10
c. 4.73
d. 6.50
e. none of the above
Answer: C
If we now assume that the stock pays a dividend at a known constant rate of 3.5 percent, what stock price should we use in the model? (Due to differences in rounding your calculations may be slightly different. "none of the above" should be selected only if your answer is different by more than 10 cents.)
a. 22.60b. 19.65
c. 23.00
d. 21.99
e. none of the above
Answer: A
If the answers is incorrect or not given, you can answer the above question in the comment box. If the answers is incorrect or not given, you can answer the above question in the comment box.