Which of the Following Statements Is CORRECT

question 15

Multiple Choice

Which of the following statements is CORRECT?

• A) Call options generally sell at a price greater than their exercise value, and the greater the exercise value, the higher the premium on the option is likely to be.
• B) Call options generally sell at a price below their exercise value, and the greater the exercise value, the lower the premium on the option is likely to be.
• C) Call options generally sell at a price below their exercise value, and the lower the exercise value, the lower the premium on the option is likely to be.
• D) Because of the put-call parity relationship, under equilibrium conditions a put option on a stock must sell at exactly the same price as a call option on the stock.
• E) If the underlying stock does not pay a dividend, it does not make good economic sense to exercise a call option prior to its expiration date, even if this would yield an immediate profit.

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Definitions:

Alabama

A state in the southeastern region of the United States, known for its significant role in American civil rights history, agricultural output, and cultural heritage.

Mississippi

Mississippi is a state in the southern United States, known for its rich cultural heritage, historical significance in the civil rights movement, and as a major site of agricultural production.

Missouri

A state in the central United States known for its diverse geography and as the starting point for the Lewis and Clark expedition.

Civil Rights Act

Landmark legislation in the United States that outlawed discrimination based on race, color, religion, sex, or national origin, primarily associated with the Civil Rights Act of 1964.