The Value of a Call Option Is Inversely Related To

question 35

Multiple Choice

The value of a call option is inversely related to:

• A) Underlying stock price.
• B) Time to expiration
• C) Exercise price.
• D) a and b
• E) b and c

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Definitions:

Contribution Margin

The difference between sales revenue and variable costs of a product or service, indicating the amount contributed towards covering fixed costs and generating profit.

Financial Break-even Point

The level of revenue necessary for a firm to cover all its operating expenses and financial costs, achieving a net income of zero.

Gross Profit

The financial gain obtained after deducting the cost of goods sold from sales revenue, before subtracting any operating expenses.

Net Present Value

It's the calculation of the present value of all cash entering minus the present value of all cash exiting over a certain period.