(a) Explain why (and when) it might be advantageous to exercise an American call option early.
(b) A 6-month American call option on a stock that is expected to pay dividends of 1 euro per share at the end of the second and the fifth month. The current stock price is 30 euros, the risk-free interest rate is 10% per annum, and the volatility of the stock (adjusted by the dividend payments) is 30% per annum. Use a 6-period binomial model to determine the price of the option.