For a Call Option on a Stock That Pays Dividends,which

question 18

Multiple Choice

For a call option on a stock that pays dividends,which of the following statements is valid?

• A)The European call is worth the same as the American call.
• B)The European call always decreases in value as dividends increase,but the American call always increases in value as dividends increase.
• C)The American call is worth at least as much as the European call.
• D)The American call is less likely to be exercised as dividends increase.

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Definitions:

Payroll Register

A document that summarizes the earnings, deductions, and net pay of all employees for a specific payroll period.

Calendar Year

A one-year period that begins on January 1 and ends on December 31, used as a financial or accounting period.

Gross Pay

The entire sum an employee receives in earnings before any taxes or deductions are subtracted.

Deductions

Amounts subtracted from an employee's gross income to calculate taxable income, or expenses subtracted from gross revenue in accounting to determine net income.