Which of the Following Statements Is CORRECT

question 12

Multiple Choice

Which of the following statements is CORRECT?

• A)If the underlying stock does not pay a dividend, it makes good economic sense to exercise a call option as soon as the stock's price exceeds the strike price by about 10%, because this permits the option holder to lock in an immediate profit.
• B)Call options generally sell at a price less than their exercise value.
• C)If a stock becomes riskier (more volatile), call options on the stock are likely to decline in value.
• D)Call options generally sell at prices above their exercise value, but for an in-the-money option, the greater the exercise value in relation to the strike price, 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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Definitions:

Obsession

Persistent and intrusive thoughts, impulses, or images that cause significant anxiety or distress.

Compulsion

An intense, often overwhelming urge to carry out an action, particularly one that is illogical or against one's own desires.

Hallucination

A perception of having seen, heard, touched, tasted, or smelled something that isn't actually present, often occurring without an external stimulus.

Delusion

A false belief held with strong conviction despite superior evidence to the contrary, often found in psychiatric conditions such as schizophrenia.