There Are Call Options on the Common Stock of XYZ

question 7

Multiple Choice

There are call options on the common stock of XYZ Corporation. Which of the following best describes the factors affecting the value of these call options?

• A) The price of the call options is likely to rise if XYZ's stock price rises.
• B) The higher the strike price on the call option, the higher the call option price.
• C) Assuming the same strike price, a call option which expires in one month will sell for a higher price than a call option which expires in three months.
• D) All of the answers above are correct.
• E) None of the answers above is correct.

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Definitions:

Depreciation Expense

The systematic allocation of the cost of a tangible asset over its useful life.

Operating Expenses

Costs associated with the day-to-day operations of a business, excluding the cost of goods sold.

Annual Rate Of Return

The percentage of profit or loss on an investment over a one-year period.

Accumulated Depreciation

The total amount of a tangible fixed asset's cost that has been charged to depreciation expense since the asset was acquired.