Which of the Following Statements Regarding Factors That Affect Call

question 10

Multiple Choice

Which of the following statements regarding factors that affect call option prices is CORRECT?

• A) The longer the time until the call option expires the smaller its value and the smaller its premium.
• B) An option on an extremely volatile stock is worth less than one on a very stable stock.
• C) The price of a call option increases as the risk-free rate increases.
• D) Two call options on the same stock will have the same value even if they have different strike prices.
• E) If you observe that a put option on a stock increases in value,then a call option on that same stock also increases in value.

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Definitions:

Sensory Adaptation

The process by which sensory receptors become less sensitive to constant stimuli over time, leading to a decrease in sensation.

Masking Stimulus

A stimulus that interferes with the perception of another stimulus, often used in psychological experiments to study attention processes.

Accommodation

A concept in cognitive psychology where existing mental schemas are adjusted or expanded to incorporate new information.

Adaptation

The process by which an organism becomes better suited to its habitat through genetic changes and behavioral adjustments.