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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