How Can a 10% Dividend Be "Homemade" by an Investor

question 3

Multiple Choice

How can a 10% dividend be "homemade" by an investor that owns 100 non-dividend-paying shares priced at $20 each?

• A)Sell 10 shares and retain 90 shares priced at $18
• B)Sell 10 shares and retain 90 shares priced at $20
• C)Sell 10 shares and retain 90 shares priced at $22
• D)Dividends can be homemade only by the company

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Definitions:

Stock Price

The cost of purchasing a share of a company, as traded on a stock exchange, which may fluctuate based on supply and demand dynamics.

Exercise Price

The price at which the holder of an option can buy (in the case of a call option) or sell (in the case of a put option) the underlying asset.

Stock Volatility

The rate at which the price of a stock increases or decreases for a given set of returns, indicative of the risk or stability.

Exercise Price

The price at which an option holder can buy (call option) or sell (put option) the underlying security.