Consider an American call option when the stock price is $37, the exercise price is $35, the time to maturity is six months, the volatility is 25% per annum, and the risk-free interest rate is 5% per annum. Two equal dividends of $1.00 are expected during the life of the option, with ex-dividend dates at the end of three months and five months.
Use Black’s approximation to value the option, and enter your result to 3 decimal places.