An American Call Option on a Stock That Pays No

question 19

Multiple Choice

An American call option on a stock that pays no dividends:

• A) May be exercised early if the stock rises sharply just before maturity.
• B) Is always exercised early when the the call is deep in-the-money, and the volatility of the stock drops from its initial level.
• C) Is not exercised early unless the growth in the stock exceeds the rate of interest.
• D) Is never exercised early.

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Definitions:

Decision Unanimity

The condition in which all members of a group or decision-making body agree on a particular decision or outcome.

Groupthink

A psychological phenomenon that occurs within a group of people when the desire for harmony or conformity results in irrational or dysfunctional decision-making outcomes.

Self-Censorship

The act of withholding one's own speech or expression due to the fear of social or official repercussions.

Authority Rule

The power or right assigned to an individual or body to make decisions, enforce rules, and command obedience within a specified sphere.