Which of the Following Is Correct Regarding a Call Option

question 16

Multiple Choice

Which of the following is correct regarding a call option?

• A)The intrinsic value of a call option is the greater of zero and (K- S), the difference between the market price and the strike price.
• B)The time value of an option reflects the probability that the future market price of the underlying instrument will not exceed the strike price.
• C)The time value decreases with the length of time to expiration and the volatility of the underlying instrument (such as the share price).
• D)The time value is always positive until the option expires, so the total value of an unexpired option is always greater than the intrinsic value.

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Definitions:

Ingrown Nail

A condition where the nail grows into the flesh instead of over it, often causing pain, redness, and swelling.

Besnier's Prurigo

Also known as Atopic Dermatitis, a chronic skin condition marked by itchy and inflamed skin.

Dermatitis

A general term for inflammation of the skin, resulting in redness, itching, and sometimes blistering.

Atopic

Related to atopy, a genetic predisposition toward developing allergic hypersensitivity reactions such as eczema, asthma, or hay fever.