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:

Brain Region

A specific area within the brain responsible for certain functions or processes, such as the occipital lobe's role in visual processing.

Frontal Lobe

The part of the brain located at the front of each cerebral hemisphere, responsible for executive functions, such as judgment, problem-solving, and planning.

Infancy

A developmental period in humans from birth to approximately 24 months of age, characterized by rapid growth and significant milestones in physical, cognitive, and socioemotional development.

Moro Reflex

An involuntary reflex found in infants, involving sudden arm flapping and crying when startled.