Explain the Impact a Constant Dividend Yield Would Have on the Price

question 15

Essay

Explain the impact a constant dividend yield would have on the price of a call option.

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Definitions:

Total Risk

The sum of systematic and unsystematic risks affecting an investment or portfolio.

Systematic Risk

The risk inherent to the entire market or market segment, often impossible to mitigate through diversification alone.

Unsystematic Risk

Unsystematic risk, also known as company-specific risk or idiosyncratic risk, is the type of uncertainty that comes with a company or industry that can be mitigated through diversification.

Weights

In finance, it refers to the proportional factors assigned to different components of a portfolio or capital structure.