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

question 19

Multiple Choice

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

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

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Definitions:

Gross Negligence

A severe lack of care or attention to duty that represents a reckless disregard for the safety or lives of others, often leading to serious harm or damage.

Slight Negligence

The failure to use that degree of care that persons of extraordinary prudence and foresight are accustomed to use.

Reasonable Care

A legal standard that requires individuals or entities to act with the caution and diligence that a prudent person would under similar circumstances.

Bailment

The transfer of possession of personal property from one person to another with the understanding that the property will be returned.