When There Are Two Dividends on a Stock,Black's Approximation Sets

question 3

Multiple Choice

When there are two dividends on a stock,Black's approximation sets the value of an American call option equal to which of the following

• A) The value of a European option maturing just before the first dividend
• B) The value of a European option maturing just before the second (final) dividend
• C) The greater of the values in A and B
• D) The greater of the value in B and the value assuming no early exercise

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Definitions:

Rule Of Requirements

A principle in contract law that dictates a seller must supply only the quantity of goods that a buyer requires, no less and no more.

Triple

Multiplication by three or having three parts; in some contexts, it may refer to a rating, niveau, or layer that is three times stronger, higher, or more intense.

Supply

The total amount of a product or service available for purchase at any given time.

Statute Of Frauds

A rule of law that mandates specific kinds of agreements must be documented and signed to have legal force.