I have bolded the answers I chose. I just need someone to checkmy work and if I'm wrong possibly explain why, please?
1. If a stock pays a dividend, the owner of a call option willsee the value of their option decrease by the amount of thatdividend payment.
a. true
b. false
2. DEF stock currently trades for $40. Both American calls andputs are available on the stock. All else being constant, which ofthe following will occur if the stock price falls to $35?
a. Both the call and put premium will increase.
b. The call premium will increase while the put premium willdecrease.
c. Both the call and put premium willdecrease.
d. None of the above.
3. PQU stock has two series of European call options. Bothseries expire in six months, but one series has a strike price of$50, while the other series has an exercise price of $60. If themarket is in equilibrium, it must case that the $50 series has ahigher premium than the $60 series on any given day prior toexpiration.
a. true
b. false
4. A 9-month American call on Smith stock with an exercise priceof $20 sells for $1.25. A 9-month European call on Smith stockcarries a strike price and premium of $22 and $1.1, respectively.If the American call isn't exercised early, which of the followingwill occur when the options expire?
a. The American call will have a higher premium than theEuropean call.
b. The American call will have a lower premium than the Europeancall.
c. The premiums for both options will be thesame.
d. Cannot be determined.
