An American-Style Call Option with Six Months to Maturity Has

question 10

Multiple Choice

An American-style call option with six months to maturity has a strike price of $42. The underlying stock now sells for $50. The call premium is $14. If the company unexpectedly announces it will pay its first-ever dividend four months from today, you would expect that

• A) the call price would increase.
• B) the call price would decrease.
• C) the call price would not change.
• D) the put price would decrease.
• E) the put price would not change.

---

Definitions:

Liver

A large, vital organ in vertebrates that performs a wide range of functions, including detoxification, protein synthesis, and production of biochemicals necessary for digestion.

Lobes

Divisions or sections of an organ, separated by fissures or boundaries, often found in the brain, lungs, and liver.

Lingual Frenulum

The lingual frenulum is a small fold of mucous membrane that extends from the floor of the mouth to the midline of the underside of the tongue, aiding in the movement of the tongue.

Oral Cavity

The mouth, an opening in the body equipped with teeth, tongue, and glands, acting as the entry point for food and air.