When the Time to Maturity Increases with All Else Remaining

question 17

Multiple Choice

When the time to maturity increases with all else remaining the same,which of the following is true?

• A) European options always increase in value
• B) The value of European options either stays the same or increases
• C) There is no effect on European option values
• D) European options are liable to increase or decrease in value

---

Definitions:

Disbursement Float

The time between when a check is issued by a company and when the funds are actually removed from the company's bank account.

Cheques

Documents that order a bank to pay a specific amount of money from a person's account to the person in whose name the cheque has been issued.

Collection Float

The time span between when a check is deposited and when the funds are actually available in the account, reflecting processing time.