Which of the following statements is correct regarding a binomial option pricing model?

Question

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In case of a dollar dividend paid at an intermediate date (i.e., not at expiration), it is appropriate to lower the stock price by the dividend amount in the corresponding node of the binomial tree. This adjustment is necessary to properly account for the change in the value of the underlying asset due to the dividend payment. Adjusting the option price directly (as in A or B) would not be accurate, and choice D is incorrect as the stock price tree generally does not recombine due to dividend payments.

Which of the Following Statements Is Correct Regarding a Binomial