The Time Value of an Option Is the

question 30

Multiple Choice

The time value of an option is the

• A) difference between the price of the underlying security and the strike price.
• B) value due to expectations that the price of the underlying security will rise above the strike price.
• C) minimum value of the option.
• D) option premium value.

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Definitions:

Accounting Equation

The foundational principle of double-entry bookkeeping, stating that assets equal liabilities plus shareholders' equity.

Components

Elements or parts that combine to form a larger product or system.

Net Profit Margin Ratio

A profitability metric that shows the percentage of revenue that remains as net income after all expenses have been deducted.

Net Income

The total earnings of a company after accounting for all expenses and taxes, reflecting the company's profitability.