Which of the Following Statements Is Most Correct, Holding Other

question 21

Multiple Choice

Which of the following statements is most correct, holding other things constant, for XYZ Corporation's traded call options?

• A) The higher the strike price on XYZ's options, the higher the option's price will be.
• B) Assuming the same strike price, an XYZ call option that expires in one month will sell at a higher price than one that expires in three months.
• C) If XYZ's stock price stabilizes (becomes less volatile), then the price of its options will increase.
• D) If XYZ pays a dividend, then its option holders will not receive a cash payment, but the strike price of the option will be reduced by the amount of the dividend.
• E) The price of these call options is likely to rise if XYZ's stock price rises.

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Definitions:

Dual Innervation

The condition in which organs receive nerve fibers from both the sympathetic and parasympathetic nervous systems, often with opposite effects.

Sympathetic Effects

Responses or alterations in the body functions that are stimulated by the sympathetic nervous system, part of the autonomic nervous system that controls "fight or flight" reactions.

Parasympathetic Effects

Physiological actions resulting from the activation of the parasympathetic nervous system, including a decrease in heart rate and the promotion of digestion.

ANS

Autonomic Nervous System, a part of the nervous system that controls involuntary bodily functions, such as heart rate, digestion, and respiratory rate.