Which of the following is true, select the most appropriate answer below. An American call option...

Which of the following is true, select the most appropriate answer below.

		An American call option on a stock should never be exercised early
		An American call option on a stock should never be exercised early when no dividends are expected
		There is always some chance that an American call option on a stock will be exercised early
		There is always some chance that an American call option on a stock will be exercised early when no dividends are expected

Solutions

Expert Solution

B) An American call option on a stock should never be exercised early when no dividends

Are expected.

Reasons : 1) It is best to delay paying the strike price by exercising it as late as possible

2) Insurance provided by the option ( that the stock price will fall below the

Strike price) is lost

jeff jeffy answered 2 years ago

Next > < Previous

Related Solutions

7. Which of the following statements about an American call option is not true? a. its...

7. Which of the following statements about an American call option 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 8. Under what circumstances can the writer of a call option expect to profit? a. stock price declines b. stock price remains the same c. the increase in stock price is less than...

Which of the following is true? Group of answer choices For American options, the put-call parity...

Which of the following is true? Group of answer choices For American options, the put-call parity result provides a lower bound but no upper bound for the difference between call and put prices. For American options, the put-call parity result provides an upper bound but no lower bound for the difference between call and put prices. For American options, the put-call parity result provides an upper bound and a lower bound for the difference between call and put prices. Cash...

Answer the following with True/False: You buy a put and a call option simultaneously in a...

Answer the following with True/False: You buy a put and a call option simultaneously in a protective put. For put-call parity to hold, the exercise price of call and put options must be similar. The formula for continuous discounting is FV (e -rt) . The minimum value for a put option can sell, can be written as Max (0, P - E). The intrinsic value of an in-the-money call option is written as: C=P0 - E. d1 and d2...

Which of the following statements is true? Select the correct answer below: The U.S. economy has...

Which of the following statements is true? Select the correct answer below: The U.S. economy has had persistent trade surpluses since the 1970s A large measure of exports as a percentage of GDP indicates large levels of globalization in a country. If exports as a percentage of GDP are low, then a large trade deficit will not have a huge impact on a country's economy. It is better for a country to have large exports as a percentage of GDP.

Consider an American call on a non-dividend-paying stock. Which of the following is NOT true? The...

Consider an American call on a non-dividend-paying stock. Which of the following is NOT true? The value of the American call is greater than that of a comparable European call. The holder of the American call should never exercise it early. The value of the American call is the same as that of a comparable European call. The holder would generate a greater payoff by selling the American call than by exercising it early.

Which of the following statements is true? Select the correct answer below: All companies can afford...

Which of the following statements is true? Select the correct answer below: All companies can afford to provide of cost of living adjustments to their employees. Lenders only provide loans that adjust automatically with inflation. Social Security benefits are not protected against inflation. During inflationary periods, some politicians could becomes less opposed to indexing.

Select the true answer 1. Which of the following is an example of the subject matter...

Select the true answer 1. Which of the following is an example of the subject matter of a bribe? to throw out a speeding ticket to obtain a government construction project to obtain a certain zoning determination of a local municipal board All of the above responses are correct. 2.Which of the following constitutes bribery? when a person offers something of value to another person in order to receive something in exchange when a person tells someone not to do...

Which of the following statements is true? Select the correct answer a.NONE OF THE STATEMENTS ARE...

Which of the following statements is true? Select the correct answer a.NONE OF THE STATEMENTS ARE TRUE b.Electric forces depend on velocity of a charged object c.Objects having a net charge experience only electric force, not magnetic force d.It is impossible to separate the North and South poles of a bar magnet e.Electric forces decrease with decreasing distance from charges, but magnetic forces do not decrease with decreasing distance from magnets

Which of the following is the most liquid? Select an answer and submit. For keyboard navigation,...

Which of the following is the most liquid? Select an answer and submit. For keyboard navigation, use the up/down arrow keys to select an answer. a The stock of a Fortune 500 company b A bond issued by the US government c A bank checking account d A bank savings account

Which of the following statements is/are TRUE? (i.e. select ONLY the answer(s) that is/are TRUE.) 1.RNA...

Which of the following statements is/are TRUE? (i.e. select ONLY the answer(s) that is/are TRUE.) 1.RNA polymerase does not require primer to initiate the process of assembly of nucleotide triphosphates. This is in contrast to DNA replication, where primer is required at initiation. 2.The addition of a Poly-A tail on the end of a transcript happens because of the transcription of the Poly-T signal from the corresponding gene. 3.The molecule Poly-A polymerase is responsible for addition of the Poly-A sequence...

Subjects