The Current Price of a Stock Is $50

question 15

Multiple Choice

The current price of a stock is $50. Every month, the stock price will rise by a factor of 1.2 or fall by a factor of 0.8; and a $1 risk-free investment will be worth $1.03. Dividends are paid as a proportion of 0.02 of the stock price. What is the early-exercise premium on the 49-strike, six-month American call?

• A) $0.00
• B) $0.02
• C) $0.06
• D) $0.11

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