(a) When considering option values, if dividends increase, holding all else constant, does the difference between...

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(a) When considering option values, if dividends increase, holding all else constant, does the difference between American calls and puts increase or decrease? [2 marks] Why? [2 marks] What about the difference between European calls and puts? [2 marks] (b) Can an American call or a put option have an early exercise premium if there is no leakage? Explain why. [4 marks] (a) When considering option values, if dividends increase, holding all else constant, does the difference between American calls and puts increase or decrease? [2 marks] Why? [2 marks] What about the difference between European calls and puts? [2 marks] (b) Can an American call or a put option have an early exercise premium if there is no leakage? Explain why. [4 marks]

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a When dividends increase the difference between American calls and puts tends to decrease This is b... View the full answer