Which of the Following Statements Is True? Consider Options Written

question 28

Multiple Choice

Which of the following statements is true? Consider options written on a non-dividend-paying stock.

• A)All American options have negative theta and positive gamma.
• B)American calls have negative theta and positive gamma,but American puts may sometimes have positive theta and negative gamma.
• C)All American options have negative theta and all American calls have positive gamma,but American puts may sometimes have negative gamma.
• D)All American options have positive gamma and American calls have negative theta,but American puts may sometimes have positive theta.

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Definitions:

Effective Interest Rate

The real rate of return on a loan or financial product, reflecting the actual interest earned or paid over a specified period, including the effect of compounding.

Stated Rate

The interest rate declared on a financial instrument, such as a bond or loan, which may differ from the effective or market rate of interest.

Bond Interest Expense

The cost incurred by an issuer of bonds to the bondholders, representing the interest payments made periodically.

Effective Yield

This term represents the total yield an investment returns, adjusted for compounding over a standard one-year period.