If the Stock Makes a Dividend Payment Before the Expiration

question 60

Multiple Choice

If the stock makes a dividend payment before the expiration date then the put-call parity is:

• A) Value of call = value of put + share price - present value (PV) of dividend -PV of exercise price
• B) Value of call = value of put - share price + PV of dividend - PV of exercise price
• C) Value of call = value of put + share price + PV of dividend + PV of exercise price
• D) Value of call = value of put + share price + PV of dividend - PV of exercise price

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Definitions:

Second-order Polynomial

A polynomial of degree two, typically expressed as \(ax^2 + bx + c\), which represents a quadratic function.

First-order Polynomial

A mathematical expression of the form ax + b, where a and b are constants, and x is a variable.

Interaction

The effect that occurs when the impact of one variable on a response variable changes depending on the level of another variable in statistical models.

Straight Lines

The shortest distance between two points on a plane, characterized by an unchanging direction.