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Q5: Which of the following statements are true about early option exercise (for American style options)? (Assume r > 0.) 1. It is never optimal to early exercise a call option on a non-dividend paying stock. 2. It is never optimal to early exercise a put option on a non-devidend paying stock.

Q5: Which of the following statements are true about early option exercise (for American style options)? (Assume r > 0.) 1. It is never optimal to early exercise a call option on a non-dividend paying stock. 2. It is never optimal to early exercise a put option on a non-devidend paying stock.

Essentials Of Investments
Essentials Of Investments
11th Edition
ISBN:9781260013924
Author:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Publisher:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Chapter1: Investments: Background And Issues
Section: Chapter Questions
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3. It is always optimal to early exercise an in the money American style option on the day before a dividend is payable. 4. Because of the possibility of early exereise, put call parity does not apply to American style options. A) 1 & 4 B) 1, 2, & 3 C) 1 & 2 D) 3 E) All of them
Transcribed Image Text:3. It is always optimal to early exercise an in the money American style option on the day before a dividend is payable. 4. Because of the possibility of early exereise, put call parity does not apply to American style options. A) 1 & 4 B) 1, 2, & 3 C) 1 & 2 D) 3 E) All of them
Q5: Which of the following statements are true about early option exereise (for American style options)? (Assume r > 0.) 1. It is never optimal to early exercise a call option on a non-dividend paying stock. 2. It is never optimal to early exercise a put option on a non-devidend paying stock.
Transcribed Image Text:Q5: Which of the following statements are true about early option exereise (for American style options)? (Assume r > 0.) 1. It is never optimal to early exercise a call option on a non-dividend paying stock. 2. It is never optimal to early exercise a put option on a non-devidend paying stock.
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