Which of the following approaches can be used with the Black-Scholes options pricing model to...
70.2K
Verified Solution
Link Copied!
Question
Finance
Which of the following approaches can be used with the Black-Scholes options pricing model to estimate the value of a European option on a dividend paying common stock?
a. Subtract the dividends expected during the life of the option from the stock price.
b. Select an "a" parameter which includes a constant percentage dividend yield.
c. Subtract the present value of dividends expected during the life of the option from the stock price.
d. Ignore the expected dividends, but increase the interest rate used for discount by an amount equal to the stocks dividend yield.
e. Calculated the value of the options as thought the stock did not pay dividends and add the amount of the expected dividends to the resulting option price.
e.
Get Answers to Unlimited Questions
Join us to gain access to millions of questions and expert answers. Enjoy exclusive benefits tailored just for you!
Membership Benefits:
- Unlimited Question Access with detailed Answers
- Zin AI - 3 Million Words
- 10 Dall-E 3 Images
- 20 Plot Generations
- Conversation with Dialogue Memory
- No Ads, Ever!
- Access to Our Best AI Platform: Flex AI - Your personal assistant for all your inquiries!
Other questions asked by students
StudyZin's Question Purchase
1 Answer
$0.99
(Save $1 )
One time Pay
- No Ads
- Answer to 1 Question
- Get free Zin AI - 50 Thousand Words per Month
Unlimited
$4.99*
(Save $5 )
Billed Monthly
- No Ads
- Answers to Unlimited Questions
- Get free Zin AI - 3 Million Words per Month
*First month only
Free
$0
- Get this answer for free!
- Sign up now to unlock the answer instantly
You can see the logs in the Dashboard.