The Call Option on a Dividend Paying Equity Compared to a Non-Dividend

question 4

Multiple Choice

The call option on a dividend paying equity compared to a non-dividend paying equity is:

• A)more valuable because of the extra dividend payment.
• B)equal in value because cash dividends are paid on equity only.
• C)less valuable because cash dividends are paid on equity only.
• D)less valuable if the dividend paying equity is in-the-money while the non-dividend paying equity if out-of-the-money.
• E)None of the above.

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Definitions:

National Income

National Income is the total income earned by the residents of a country, including wages, profits, rents, and taxes, minus subsidies, over a certain period of time, often used to assess the economic health of a country.

Wages

Compensation provided to workers for their efforts or tasks, usually determined based on hours worked, daily rates, or the amount of work completed.

Salaries

Fixed regular payments, typically paid on a monthly or biweekly basis but often expressed as an annual sum, made by an employer to an employee, especially a professional or white-collar worker.

Fringes

Additional benefits provided to employees beyond their regular salaries, such as health insurance or retirement plans.