Answers: a) 6.231 b) 6.868 3. (10 points) Consider a stock that pays dividends...
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a) 6.231
b) 6.868
3. (10 points) Consider a stock that pays dividends of $7 in 3 months and $5 in 6 months. The stock currently trades for $77 per share. The annual continuously compounded risk-free interest rate is 10%, and the annual price volatility relevant for the Black-Scholes equation is 25%. (a) Find the Black-Scholes price of a call option with strike price $73 and expiration time of 12 months (b) Use put-call parity to find the price of the corresponding put option
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