Hi, Question mainly for a tutor but would be good if others gave their answers : Bounds on Options, CT8 exam, April 2012, Q4. (Also revision book 5, Q23) Qa) Question on theory in (4i): Why would the call holder receive a dividend payment? Surely the stock holder receives and keeps the dividend and just gives the stock to the call holder if exercised? Qb) Question on (4i): I understand that stock holder, portfolio B, has at maturity S_T + De^(rT1). I do not understand why at time 0 the stock holder only has S_T. Why do they not have 1 dividend paying share and a discounted dividend, S_T + De^(-rT1). Qc) Question on (4ii), similarly to the above question, at time 0 why does the holder of the put not have a discounted dividend, De^(-r(T-T1)), but has this dividend at maturity? Also, why cant we use the call put parity in this question? Thank you for answering.