With respect to American calls, which of the following statements is most accurate?
American calls should be exercised early if the underlying has reached its expected maximum price.
B. American calls should be exercised early if the underlying has a lower expected return than the risk- free rate.
C. American calls should be exercised early only if there is a dividend or other cash payment on the underlying.
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The effect of dividends on a stock on early exercise of a put is to:
A. make early exercise less likely.
B. have no effect on early exercise.
C. make early exercise more likely.
Prior to expiration, the maximum value of an Americana call option and an American put option, respectively, is closest to the: American call option ?American put option?
A. Exercise price, Exercise price
B. Exercise price, Underlying price
C. Underlying price, Exercise price
D. Underlying price, Underlying price
An investor is long an in-the-money American call option. Would this option most likely ever be exercised early?
A. No.
B. Yes, if its time value is high enough.
C. Yes, if it pays a high enough dividend.
Which statement best describes the early exercise of American options? Early exercise may be advantageous for:
A. both deep-in-the-money calls and deep-in-the-money puts.
B. deep-in-the-money puts.
C. deep-in-the-money calls.