Which of the Following Statements Is CORRECT

question 15

Multiple Choice

Which of the following statements is CORRECT?

• A) Call options generally sell at a price greater than their exercise value, and the greater the exercise value, the higher the premium on the option is likely to be.
• B) Call options generally sell at a price below their exercise value, and the greater the exercise value, the lower the premium on the option is likely to be.
• C) Call options generally sell at a price below their exercise value, and the lower the exercise value, the lower the premium on the option is likely to be.
• D) Because of the put-call parity relationship, under equilibrium conditions a put option on a stock must sell at exactly the same price as a call option on the stock.
• E) If the underlying stock does not pay a dividend, it does not make good economic sense to exercise a call option prior to its expiration date, even if this would yield an immediate profit.

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Definitions:

Technical Knowledge

Expertise or skills in specific fields, particularly those related to science, engineering, technology, or computing.

Commerce Clause

A provision in the United States Constitution that grants Congress the power to regulate trade between states, with foreign nations, and among Indian tribes.

Article I

Refers to the first article of a constitution, typically outlining the structure and power of the legislative branch in a government.