Which of the Following Statements Is CORRECT

question 10

Multiple Choice

Which of the following statements is CORRECT?

• A)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.
• B)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.
• C)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.
• D)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.
• E)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.

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