ABC stock is currently trading at R70 per share. A dividend of R1 is expected after three months and another one of R1 after six months. A European call option on ABC stock has a strike price of R65 and 8 months to maturity. Given that the risk-free rate is 10% and the volatility is 32%, compute the price of the option.

Essentials Of Investments
11th Edition
ISBN:9781260013924
Author:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
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Chapter1: Investments: Background And Issues
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ABC stock is currently trading at R70 per share. A dividend of R1 is expected after three months
and another one of R1 after six months. A European call option on ABC stock has a strike price
of R65 and 8 months to maturity. Given that the risk-free rate is 10% and the volatility is 32%,
compute the price of the option.

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