The Call Option on a Dividend Paying Stock Compared to a Non-Dividend

question 11

Multiple Choice

The call option on a dividend paying stock compared to a non-dividend paying stock is:

• A) more valuable because of the extra dividend payment.
• B) equal in value because cash dividends are paid on stock.
• C) less valuable because cash dividends are paid on stock.
• D) less valuable if the dividend paying stock is in-the-money while the non-dividend paying stock if out-of-the-money.

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Definitions:

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