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Basic Question 3 of 9

Which factors DISCOURAGE early exercise of American puts?

I. Dividends, if the underlying is a stock
II. Storage costs, if the underlying is a commodity
III. Coupon interest, if the underlying is a bond

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Craig Baugh

Craig Baugh

Learning Outcome Statements

calculate the no-arbitrage values of European and American options using a two-period binomial model;

identify an arbitrage opportunity involving options and describe the related arbitrage;

CFA® 2025 Level II Curriculum, Volume 5, Module 32.