Higher dividend-payout policies have a __________ impact on the value of the call and a __________ impact on the value of the put compared to lower dividend-payout policies.
A) negative; negative
B) positive; positive
C) positive; negative
D) negative; positive
E) zero; zero

Question

Quizplus · Accepted Answer

Higher dividend-payout policies decrease the value of a call option because dividends reduce the stock price when they are paid out, making it less likely that the call will be in the money. Conversely, higher dividends increase the value of a put option, as the reduction in stock price makes it more likely that the put will be in the money.

Higher Dividend-Payout Policies Have a __________ Impact on the Value