The price of a stock, which agreed to pay 2$ dividends per share, is $45 and the strike price of a one-year European call option on the stock is $43. The risk-free rate is 7% (continuously compounded). Which of the following is a lower bound for the option? option 1 - $5.98 option 2- $2.91 option 3 - $2.54 option 4 -$4.14

The price of a stock, which agreed to pay 2$ dividends per share, is $45 and the strike price of a one-year European call option on the stock is $43. The risk-free rate is 7% (continuously compounded). Which of the following is a lower bound for the option? option 1 - $5.98 option 2- $2.91 option 3 - $2.54 option 4 -$4.14

EBK CONTEMPORARY FINANCIAL MANAGEMENT

14th Edition

ISBN:9781337514835

Author:MOYER

Publisher:MOYER

Chapter20: Financing With Derivatives

Section: Chapter Questions

Problem 1P

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