Which of the Following Statements Regarding Factors That Affect Call

question 10

Multiple Choice

Which of the following statements regarding factors that affect call option prices is CORRECT?

• A) The longer the time until the call option expires the smaller its value and the smaller its premium.
• B) An option on an extremely volatile stock is worth less than one on a very stable stock.
• C) The price of a call option increases as the risk-free rate increases.
• D) Two call options on the same stock will have the same value even if they have different strike prices.
• E) If you observe that a put option on a stock increases in value,then a call option on that same stock also increases in value.

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Definitions:

Cost Concept

An accounting principle that states assets and services should be recorded and based on their original cost at the time of acquisition.

Unit of Measure Concept

An accounting principle that states transactions should be recorded in a single, consistent currency unit for accuracy and comparability.

Objectivity Concept

A concept of accounting that requires accounting records and the data reported in financial statements to be based on objective evidence.

American Red Cross

A humanitarian organization that provides emergency assistance, disaster relief, and education within the United States.