Considering a Call Option, If the Price of the Underlying

question 68

Multiple Choice

Considering a call option, if the price of the underlying asset decreases:

• A) the intrinsic value of the option decreases if it is above zero.
• B) the intrinsic value of the option increases if it is above zero.
• C) the strike price decreases.
• D) the value of the option increases.

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Definitions:

Contribution Margin

The selling price per unit minus the variable cost per unit, used to determine how sales affect net income.

Sales Projections

Estimates of the future sales revenue of a company, which are often based on historical sales data, market trends, and other relevant factors.

NPV

Net Present Value, a calculation used to determine the value of an investment by discounting future cash flows to their present value.

Payback Analysis

A financial analysis method used to determine the time required to recoup the cost of an investment or project.