Suppose the Underlying Stock Pays a Dividend Before the Expiration

question 12

Multiple Choice

Suppose the underlying stock pays a dividend before the expiration of options on that stock. This will:
I.increase the value of a call option;
II.increase the value of a put option;
III.decrease the value of a call option;
IV.decrease the value of a put option

• A)I and II only
• B)III and IV only
• C)I and IV only
• D)II and III only

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Definitions:

Sexual Reproduction

The process by which organisms produce offspring through the combination of genetic materials from two different cells, typically involving male and female gametes.

Genetic Diversity

The total number of genetic characteristics in the genetic makeup of a species, contributing to its ability to adapt and survive changes.

Asexual Reproduction

A mode of reproduction that does not involve the fusion of gametes, resulting in offspring genetically identical to the parent.

Diploid Cells

Cells that have two complete sets of chromosomes, one from each parent, characteristic of most organisms’ body cells.