An American-style call option with six months to maturity has a strike price of $35.The underlying stock now sells for $43.The call premium is $12.If the company unexpectedly announces it will pay its first-ever dividend 3 months from today,you would expect that
A) the call price would increase.
B) the call price would decrease.
C) the call price would not change.
D) the put price would decrease.
E) the put price would not change.

Question

Quizplus · Accepted Answer

The call price would decrease because the dividend payment would reduce the stock price, making the call option less valuable.

An American-Style Call Option with Six Months to Maturity Has