The Value of a Call Option Increases as the Time

question 4

Multiple Choice

The value of a call option increases as the time to expiration increases because:

• A) the exercise price continually decreases.
• B) opportunity increases to surpass exercise price.
• C) dividends accumulate while waiting to be paid.
• D) the option can be repeatedly exercised.

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Definitions:

Residual Income

The net operating income an investment earns above the minimum rate of return expected by its investors or company management.

Turnover

The rate at which inventory is sold and replaced or an employee leaves and is replaced within a company.

Turnover

Turnover is a financial metric that measures the rate at which a company sells and replaces its inventory or the efficiency with which it uses its assets to generate sales.

Return On Investment

A measure used to evaluate the efficiency or profitability of an investment, calculated by dividing the gain from the investment by its cost.