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Ask the Tutor ACCA AFM
June 2012 Q1
What you say is correct.
However strictly the BS formulae only apply when there is a fixed date for exercising the option (a European option) and so we do not really have a choice but to assume it is exercised in 2 years time.
(Mind you, it would be a good point to mention in writing - it might get you a bonus mark :-)) )
You are welcome :-)
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