Which of the Following Is True About Options

question 3

Multiple Choice

Which of the following is true about options?

• A)​Generally, higher volatility of the underlying increases the value of the option.
• B)​The value of an option is realized only through its being exercised.
• C)​An American option is exercisable at its maturity date.
• D)​An option premium is refundable if the option becomes unfavorable.

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Definitions:

Majority Voting

A voting system in which the option that receives more than half of the votes wins, often used in elections and decision-making processes.

Median Voter

The voter positioned at the median of the preference spectrum, whose choices can represent the most typical or moderate viewpoint in the voting population.

Economically Inefficient

A situation where resources are not allocated in a way that maximizes the total benefit to society, often resulting in wasted or misallocated resources.

Voter Failure

A situation where voters are uninformed or make irrational decisions, leading to outcomes not reflecting the true preferences of the majority.