Which of the following statements about an American call is not true?
A)Its time value decreases as expiration approaches
B)Its maximum value is the stock price
C)It can be exercised prior to expiration
D)It pays dividends
E)none of the above

Question

Quizplus · Accepted Answer

An American call option does not pay dividends. It only gives the holder the right to buy the underlying stock at a predetermined price before the expiration date. Dividends are paid by the underlying stock and do not affect the option itself. Therefore, statement D is not true.

Which of the Following Statements About an American Call Is