The Longer the Time to Expiration, the Lower the Option

question 117

True/False

The longer the time to expiration, the lower the option time premium tends to be.

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Definitions:

Income Tax Rate

The Income Tax Rate is the percentage at which an individual or corporation is taxed on their income, varying according to earnings and jurisdictional tax laws.

After-Tax Discount Rate

The rate of return used in capital budgeting that accounts for taxes, providing a more accurate measure of net present value or investment profitability.

Straight-Line Depreciation

A procedure for apportioning the cost of a tangible good over its operational lifespan in uniform annual amounts.

Initial Investments

The initial capital outlay required to start a project, purchase assets, or acquire a company, reflecting the upfront costs to begin operations.