The Time Value of the Option Can Best Be Defined

question 43

Multiple Choice

The time value of the option can best be defined as

• A) the commission earned by a broker.
• B) the fee earned for the potential benefits from buying the option.
• C) the service fee charged by the SEC for regulating the option market.
• D) the fee paid for the potential benefits from buying an option (excluding its intrinsic value).

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Definitions:

Federal Communications Commission

A U.S. government agency responsible for regulating interstate and international communications by radio, television, wire, satellite, and cable.

Industrial Regulation

The application of laws and rules by government agencies to control the way industries operate, with the goal of ensuring fairness, safety, and environmental stewardship.

Natural Monopolists

Firms that can provide goods or services at a lower cost than any competitors, often due to economies of scale, making them the sole provider in the market.

Marginal Cost Pricing

Setting the price of a good or service equal to the additional cost of producing one extra unit. This strategy is often used to achieve efficiency in markets.