Which of the Following Is a Way of Extending the Black-Scholes-Merton

question 13

Multiple Choice

Which of the following is a way of extending the Black-Scholes-Merton formula to value a European call option on a stock paying a single dividend?

• A) Reduce the maturity of the option so that it equals the time of the dividend
• B) Subtract the dividend from the stock price
• C) Add the dividend to the stock price
• D) Subtract the present value of the dividend from the stock price

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Definitions:

Personal Property

refers to movable items owned by an individual or corporation, excluding real estate.

Real Property

Refers to land and any permanent structures attached to it, such as buildings or houses.

Tangible Personal Property

Physical items owned by an individual or entity, such as furniture, vehicles, and electronics, excluding real estate.

Real Property

Land and anything permanently attached to it, such as buildings, fences, and natural resources, recognized as a form of tangible assets.