Which of the Following Statements Is Most Correct

question 8

Multiple Choice

Which of the following statements is most correct?

• A) An option's value is determined by its exercise value, which is the market price of the stock less its striking price. Thus, an option can't sell for more than its exercise value.
• B) As stock price rises, the time value portion of an option on a stock increases because the difference between the price of the stock and the fixed striking price increases.
• C) Issuing options provides companies with a low cost method of raising capital.
• D) The market value of an option depends in part on the option's time to maturity and on the variability of the underlying stock's price.
• E) The potential loss on an option decreases as the option sells at higher and higher prices because the profit margin gets bigger.

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Definitions:

Calotype

From the Greek kalos, “beautiful.” A photographic process in which a positive image is made by shining light through a negative image onto a sheet of sensitized paper.

Camera Obscura

An ancient optical device that projects an image of its surroundings on a screen; used in drawing and for entertainment, and a precursor to modern photography.

Approximate Height

A measurement that provides an educated guess or estimation of an object or person's height, not necessarily based on precise measurements.

Gross Profit Margin

A financial metric indicating the percentage of revenue that exceeds the cost of goods sold; it measures a company’s production efficiency.