a. A European call option allows the buyer to
A) sell the underlying asset at the exercise price on the expiration date.
B) buy the underlying asset at the exercise price on or before the expiration date.
C) sell the option in the open market prior to expiration.
D) buy the underlying asset at the exercise price on the expiration date.
E) sell the option in the open market prior to expiration and buy the underlying asset at the exercise price on the expiration date.
b. If the stock price increases, the price of a put option on that stock __________ and that of a call option __________.
A) decreases, increases
B) decreases, decreases
C) increases, decreases
D) increases, increases
E) does not change, does not change
c. Low Tech Company has an expected ROE of 10%. The dividend growth rate will be ________ if the firm follows a policy of paying 40% of earnings in the form of dividends.