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Question: The put-call parity condition is altered


The put-call parity condition is altered when dividends are paid. The dividend-adjusted put-call parity formula is:
S × e–dt + P = E × e–Rt + C
where d is again the continuously compounded dividend yield.
a. What effect do you think the dividend yield will have on the price of a put option? Explain.
b. From Problem 23, what is the price of a put option with the same strike and time to expiration as the call option?


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