Briefly describe the empirical research findings with respect to corporateannouncements. Do these findings imply that cash-flow information is not useful?

b. A call option has a price of $1.50 with an exercise price of $15.50 and anunderlying asset of $18.00. Time to maturity is 90 days and assuming the current

risk free rate is 6% per annum.

I. What option pricing bounds are breached with this price?

II. Show the profit/loss to be made from trading on this information

c. A put option has been purchased and there is one ex-dividend date prior to the maturity of the option. What impact would this have on an American option?

Would your answer be the same if it is an European option?