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Mr. Smith is holding an ABC call option expiring in 6 months with an exercise price of $125. ABC stock is selling for $150 today
Mr. Smith is holding an ABC call option expiring in 6 months with an exercise price of $125. ABC stock is selling for $150 today and ABC Corporation announced a dividend payment of $1, which will be paid in 2 months. Current interest rate is zero percent. Mr. Smith weighs exercising the option now. Do you recommend him to exercise the option?
Explain why or why not.
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