Assume = $40, = 30%, = 0.08, = 0.5, and the stock is to pay a single dividend of $2 tomorrow, with no dividends thereafter. a. Suppose = $50. What is the price of a European call option? Consider...

Assume
= $40,

= 30%,

= 0.08,

= 0.5, and the stock is to pay a single dividend of $2 tomorrow, with no dividends thereafter.

a. Suppose

= $50. What is the price of a European call option? Consider an otherwise identical American call. What is its price?

b. Repeat, only suppose

= $60.

c. Under what circumstance would you not exercise the option today?