Other Things Equal, After an Option Is Created, Its

question 1

Multiple Choice

Other things equal, after an option is created, its:

• A) time value approaches zero as time passes.
• B) time value increases into its expiration date.
• C) value moves inversely with the volatility of the underlying stock.
• D) value will be zero whenever it is out of the money.

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Definitions:

Design Services

Professional services that envision and plan the construction, functionality, and aesthetics of various projects or components.

Accounting Equation

The fundamental equation of double-entry bookkeeping: Assets = Liabilities + Equity, representing the relationship between an entity’s resources and how those resources are financed.

Cash Dividends

Payments made by a corporation to its shareholder members, usually derived from the company’s profits.

Purchase

The act of obtaining goods or services in exchange for money, which can be recorded as an asset or expense depending on its use.