If the Stock Makes a Dividend Payment Before the Expiration

question 41

Multiple Choice

If the stock makes a dividend payment before the expiration date, then the put-call parity relation is

• A)Value of call = value of put + share price − present value (PV)of dividend − PV of exercise price.
• B)Value of call = value of put − share price + PV of dividend − PV of exercise price.
• C)Value of call = value of put + share price + PV of dividend + PV of exercise price.
• D)Value of call = value of put + share price + PV of dividend − PV of exercise price.

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Definitions:

Current Ratio

A liquidity ratio that measures a company's ability to pay short-term obligations with its current assets.

Operating Expenses

Costs associated with the day-to-day functions of a business, excluding production costs.

Gross Margin

Gross margin is a financial metric that measures the difference between revenue and the cost of goods sold (COGS), divided by revenue.

Accounts Receivable Turnover

A ratio that measures how effectively a company collects its receivables, calculated by dividing total net sales by the average accounts receivable.