For a Call Option on a Stock That Pays Dividends

question 12

Multiple Choice

For a call option on a stock that pays dividends, which of the following statements is valid?

• A) The European call is worth the same as the American call.
• B) The European call always decreases in value as dividends increase, but the American call always increases in value as dividends increase.
• C) The American call is worth at least as much as the European call.
• D) The American call is less likely to be exercised as dividends increase.

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Definitions:

Semantic Networks

A concept in cognitive science that describes how knowledge is organized and interconnected in the brain based on meanings and semantically related ideas.

Conditioned Responses

Conditioned responses are learned reactions to a particular stimulus that result from conditioning, as seen in classical conditioning experiments.

Semantic Concepts

Ideas and knowledge related to the meanings of words, symbols, and signs, crucial for understanding language and communication.

Eich And Metcalf

Researchers known for their work in the field of psychology, particularly in the study of memory and emotion.