If the company unexpectedly announces it will pay its first-ever dividend 4 months from today,you would expect that Refer To:
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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 announcement of a dividend payment is good news for shareholders, which should lead to an increase in the price of the stock. However, since the announcement is that the company will pay its first-ever dividend, the market may see this as the company changing its strategy from growth to more of an income focus. This change in strategy could cause some investors to sell the stock, leading to a decrease in the stock price. As a result, the call price would decrease as well. The announcement of a dividend payment should not affect the put price, as put options are used as a form of downside protection and are not related to dividend payments.

If the Company Unexpectedly Announces It Will Pay Its First-Ever