A Stock That Pays No Dividends Has a Price of $40.If

question 20

Multiple Choice

A stock that pays no dividends has a price of $40.If the interest rate is zero,then which if the following statements is valid?

• A)The three-month call is worth less than the two-month call.
• B)The time value of the three-month call is the same as that of the two-month call.
• C)The insurance value of the three-month call is the same as that of the two-month call.
• D)The intrinsic value of the three-month call is less than that of the two-month call.

---

Definitions:

Population Mean

The average value of all items in a population, representing the central point of a data set.

Confidence Interval

A range of values, derived from sample statistics, that is used to estimate the true value of a population parameter with a certain level of confidence.

Population Mean

The average value of all the individuals or elements within a complete population.

Lower Tail

The lower tail of a distribution refers to the section of the distribution that contains the smaller values, often used in the context of probabilities and statistical significance.