For a stock, you are given that: i) The current stock price is 45 i) The stock is going to pay a dividend of 1.2 after 3 months, This is the only dividend to be paid in the coming 6 months, i) A 6-month 42-strike European put option on the stock has a premium of 0.36 iv) The continuosly compounded risk-free interest rate is 4% Consider a 6-month 42-strike American call option on the stock. Is it optimal to excerise that call option now? Posihle Anawen | Yes, because the sum of implicit put protection and interest on strike is greater than the present value of dividends |No, because the sum of implicit put protection and interest on strike is greater than the present value of dividends Yes, because the sum of implicit put protection and interest on strike is smaller than the present value of dividends No, because the sum of implicit put protection and interest on strike is smaller than the present value of dividends |Cannot he determined

For a stock, you are given that: i) The current stock price is 45 i) The stock is going to pay a dividend of 1.2 after 3 months, This is the only dividend to be paid in the coming 6 months, i) A 6-month 42-strike European put option on the stock has a premium of 0.36 iv) The continuosly compounded risk-free interest rate is 4% Consider a 6-month 42-strike American call option on the stock. Is it optimal to excerise that call option now? Posihle Anawen | Yes, because the sum of implicit put protection and interest on strike is greater than the present value of dividends |No, because the sum of implicit put protection and interest on strike is greater than the present value of dividends Yes, because the sum of implicit put protection and interest on strike is smaller than the present value of dividends No, because the sum of implicit put protection and interest on strike is smaller than the present value of dividends |Cannot he determined

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

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