Question: Question 1: In the following, suppose that neither stock pays a dividend. (a) Suppose you have a call option that permits you to receive one

Question 1: In the following, suppose that neither stock pays a

Question 1: In the following, suppose that neither stock pays a dividend. (a) Suppose you have a call option that permits you to receive one share of Apple by giving up one share of AOL. In what circumstance might you early-exercise this call? (b) Suppose you have a put option that permits you to give up one share of Apple, receiving one share of AOL. In what circumstance might you early-exercise this put? Would there be a loss from not early-exercising if Apple had a zero stock price? (c) Now suppose that Apple is expected to pay a dividend. Which of the above answers will change? Why? Question 1: In the following, suppose that neither stock pays a dividend. (a) Suppose you have a call option that permits you to receive one share of Apple by giving up one share of AOL. In what circumstance might you early-exercise this call? (b) Suppose you have a put option that permits you to give up one share of Apple, receiving one share of AOL. In what circumstance might you early-exercise this put? Would there be a loss from not early-exercising if Apple had a zero stock price? (c) Now suppose that Apple is expected to pay a dividend. Which of the above answers will change? Why

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