Dividends on a stock can be incorporated into the valuation model of an option on the stock by:
A. subtracting the present value of the dividend from the current stock price.
B. subtracting the future value of the dividend from the current stock price.
C. adding the future value of the dividend to the option value.
D. adding the present value of the dividend to the current stock price.
Answer:A
The option pricing formulas can be adjusted for dividends by subtracting the present value of the expected dividend(s) from the current asset price.