Which of the Following Statements Is CORRECT

question 7

Multiple Choice

Which of the following statements is CORRECT?

• A) As the stock's price rises, the time value portion of an option on a stock increases because the difference between the price of the stock and the fixed strike price increases.
• B) Issuing options provides companies with a low cost method of raising capital.
• C) The market value of an option depends in part on the option's time to maturity and also on the variability of the underlying stock's price.
• D) The potential loss on an option decreases as the option sells at higher and higher prices because the profit margin gets bigger.
• E) An option's value is determined by its exercise value, which is the market price of the stock less its striking price.Thus, an option can't sell for more than its exercise value.

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Definitions:

Transmission Medium

A material or substance that can propagate energy or signals from one location to another. In telecommunications, it refers to the physical path between the transmitter and receiver, like fiber optics, wireless, and copper cables.

Data Communications

The process of transmitting digital information between two or more computers or devices.

Star Topology

A network topology where each node is individually connected to a central hub or switch, allowing for efficient data transmission and easy addition or removal of nodes.

Central Node

In a network, the central node is the primary point of connection that can communicate with all other nodes, acting as a central hub for data transmission.