Which of the Following Statements Is CORRECT

question 7

Multiple Choice

Which of the following statements is CORRECT?

• A) As the stock's 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 strike price increases.
• B) Issuing options provides companies with a low cost method of raising capital.
• C) The market value of an option depends in part on the option's time to maturity and also on the variability of the underlying stock's price.
• D) The potential loss on an option decreases as the option sells at higher and higher prices because the profit margin gets bigger.
• E) 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.

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Definitions:

Examinee's Work

The tasks or answers provided by an individual undergoing an examination or assessment.

Grouping

The act of classifying or organizing objects, individuals, or concepts into categories based on shared characteristics or criteria.

Rank Order

A method of arranging items in sequential order based on some criterion, often used in assessments to prioritize or sort data.

Psychodynamic

A psychological perspective that emphasizes the influence of unconscious processes and childhood experiences in shaping behavior and personality.