21. A call has 4 months left before expiration and a put (on the same stock) has

Question

21. A call has 4 months left before expiration and a put (on the same stock) has 3 months left before the that company unexpectedly announces it will pay its first-ever dividend 2 months from today, you would a. the call price and the put price would increase. b. the call price and the put price would decrease. c. the call price would increase but the put price would decrease. d. the call price would decrease but the put price would increase. e. the call price and put price would not change. expect

Explanation / Answer

C0+(D+X*e-r*t) = P0+ S0

d. the call price would decrease but the put price would increase

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