If We Define the "Premium" on an Option to Be

question 12

True/False

If we define the "premium" on an option to be the difference between the price at which an option sells and the exercise value (or the difference between the stock's current market price and the strike price), then we would expect the premium to increase as the stock price increases, other things held constant.

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Definitions:

Allowance for Doubtful Accounts

A reserve account used to estimate the amount of receivables that may not be collectible.

Current Assets

Assets that are expected to be converted into cash, sold, or consumed within one year or within the normal operating cycle of the business, whichever is longer.

Allowance for Doubtful Accounts

A contra-asset account that represents the amount of accounts receivable a company does not expect to collect.

Accounts Receivable

The money owed to a business by its customers for goods or services that have been delivered or sold but not yet paid for.