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Compute the price of the european call

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Reference no: EM132983625

Question - A stock currently trading at $121 pays a $8 dividend in four months and $5 dividend seven months. A call option on the stock with an intrinsic value of $9 expires in ten months. Annualized yield for T-bill for this option is 6% and annualized variance of the continuously compounded return on the stock is 0.0225.

(a) Compute S0′.

(b) Compute d1 and N(d1).

(c) Compute N(d2) assuming d2 is -.1153. Use this N(d2) in part (d).

(d) Compute the price of the European call.

Reference no: EM132983625

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