Which of the Following Statements Is False

question 38

Multiple Choice

Which of the following statements is false?

• A) An American call on a non-dividend-paying stock has the same price as its European counterpart.
• B) The price of any call option on a non-dividend-paying stock always exceeds its intrinsic value.
• C) It is never optimal to exercise a call option on a dividend-paying stock early - you are always better off just selling the option.
• D) If the present value of the dividend payment is large enough, the time value of a European call option can be negative, implying that its price could be less than its intrinsic value.

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Definitions:

Transactions

The actions carried out between two parties that result in the exchange of goods, services, or financial assets.

Treasury Stock

Shares that were once part of the outstanding shares of a company but were subsequently repurchased by the company and are held in its treasury.

Stockholders' Equity

Refers to the owners' residual interest in the assets of a corporation, after deducting liabilities.

Dividend Yield

A financial measurement showcasing the ratio of a company's annual dividend payment to its current stock price.