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Consider a stock with a price of $120 and a standard deviation of 30 percent. The...

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Finance

Consider a stock with a price of $120 and a standard deviationof 30 percent. The stock will pay a dividend of $5 in 40 days and asecond dividend of $5 and 140 days. The current risk-free rate is 6percent per annum. An American call on this stock has an exerciseprice of $150 and expires in 100 days.
Price the American call option using the Black-Scholes Model. Showall calculations

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Price the American call option using the BlackScholesModelCurrent stock price S 120 per shareExpected dividend in 40 days 5 per shareExpected dividend in 140 days 5 per share this divided neednot be adjusted into price of stock as the payout is after expiryof optionRisk free rate r 6 per year or 6365 per day assuming 365days in a yearPresent    See Answer
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