According to option pricing theory, a higher dividend payout would cause the call option premium to
A) increase
B) decrease
C) remain the same
D) any of the above can occur

Question

Quizplus · Accepted Answer

A higher dividend payout typically leads to a decrease in the call option premium because dividends reduce the underlying stock price, which negatively impacts the value of call options.

According to Option Pricing Theory, a Higher Dividend Payout Would