An American-Style Call Option with Six Months to Maturity Has

question 47

Multiple Choice

An American-style call option with six months to maturity has a strike price of $35.The underlying stock now sells for $43.The call premium is $12. If the company unexpectedly announces it will pay its first-ever dividend three months from today, you would expect that

• A)the call price would increase.
• B)the call price would decrease.
• C)the call price would not change.
• D)the put price would decrease.

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Definitions:

Foreign Currency Fluctuations

Variations in the value of one currency compared to another, which can impact international trade and investments.

Inflation

The rate at which the general level of prices for goods and services is rising, eroding purchasing power.

Income Distribution

The way in which a nation’s total income is spread among its population.

United States

A country in North America, consisting of 50 states, a federal district, five major self-governing territories, and various possessions.