Which One of the Following Statements Is True

question 97

Multiple Choice

Which one of the following statements is true?

• A)A call with a strike price of $25 and a stock price of $23 has positive intrinsic value.
• B)A European style option is more valuable than an American style option.
• C)An American style out-of-the-money call option can have a positive value.
• D)A $40 put option has more intrinsic value than a $50 put option on the same underlying asset.
• E)The time value of an option is equal to the intrinsic value minus the option premium.

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Definitions:

Note Payable

A written promise to pay a specified amount of money, typically including interest, by a certain date.

Operating Cycle

The amount of time it takes for a company to purchase inventory, sell it, and convert the sales back into cash.

Interest Expense

The cost incurred by an entity for borrowed funds, representing interest payments made or accrued on outstanding debts.

Income Statement

A financial statement that shows a company's revenues and expenses over a specific period, resulting in net income or loss.