A stock sells for $50 today. The riskless rate over the period is 10%. Suppose you consider holding the stock for two years, and each year it either...

Suppose you consider holding the stock for two years, and each year it either goes up by 30% or down by 20%.The company has already announced its dividend policy: it will pay a $15 dividend immediately before the stock price goes above $70. You hold a Bermudan call option with strike price K= $55, which expires in two years. You can exercise your option today, in one year from now, or in two years. Should you exercise the option early? (Hint:

There is no shortcut for this problem. You have to do the work. Draw the stock payoff diagram, and make sure you factor in the $15 dividend payment when the value of the stock is larger than $70.)