Which of the Following Factors Would Tend to Increase the Size

question 34

Multiple Choice

Which of the following factors would tend to increase the size of the premium on an options contract?

• A)The option is near its expiration date.
• B)The current default-risk-free interest rate is high.
• C)The price volatility of the underlying asset is low.
• D)The option is far away from its expiration date.

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Definitions:

Long-term Lease Obligation

A financial commitment that involves leasing an asset for a long-term period, noted on the balance sheet as a liability.

Capital Lease

A Capital Lease is a lease agreement that has the characteristics of a purchase agreement for accounting purposes.

Present Value

The current value of a future amount of money or stream of cash flows given a specified rate of return.

Executory Costs

Refers to the costs related to executing a lease that are neither initially capitalized nor recognized in the income statement immediately, typically involving future operating expenses under a lease agreement.