Which of the Following Is True of Options Based on the Put-Call

question 16

Multiple Choice

Which of the following is true of options based on the put-call parity formula?

• A)It pays to exercise an American call option prematurely on an equity that pays no dividends before expiration.
• B)If the underlying equity pays no dividends before expiration,then the no-arbitrage values of American and European call options with the same features will be different.
• C)An investor does not capture the full value of an American call option by exercising between ex-dividend dates.
• D)The no-arbitrage prices of American and European call options are the same irrespective of the dividend payments.

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Definitions:

Prolactin

A hormone secreted by the anterior pituitary gland that stimulates milk production in mammals.

Anterior Pituitary

The front portion of the pituitary gland, responsible for producing and releasing hormones that regulate many bodily functions.

Glucagon

Glucagon is a hormone produced by the pancreas that raises blood glucose levels by promoting the breakdown of glycogen to glucose in the liver.

Progesterone

A hormone produced mainly by the ovaries involved in the menstrual cycle, pregnancy, and embryogenesis.