The Shorter the Time to the Expiration Date for a Currency

question 27

Multiple Choice

The shorter the time to the expiration date for a currency, the ____ will be the premium of a call option, and the ____ will be the premium of a put option, other things equal.

• A) greater; greater
• B) greater; lower
• C) lower; lower
• D) lower; greater

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Definitions:

Marginal Tax Rate

Refers to the rate at which the next dollar of taxable income is taxed.

Tax Cuts

Reductions in the amount of taxes that individuals or corporations must pay to the government.

Proportional

Proportional describes a relationship or ratio that maintains the same relative size or aspect between items or variables.

Regressive

Refers to a tax system in which the tax rate decreases as the taxable amount increases, often placing a heavier burden on low-income earners.