For a Given Call Option Price, Which of the Following

question 24

Multiple Choice

For a given call option price, which of the following statements is correct?

• A)The closer the strike price is to the current price of the underlying asset, the smaller the time value of the option.
• B)The closer the strike price is to the current price of the underlying asset, the larger the time value of the option.
• C)As the strike price approaches the price of the underlying asset, the time value of the option approaches zero.
• D)As the strike price approaches the price of the underlying asset, the intrinsic value of the option increases and the time value of the option decreases.

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Definitions:

Immediate Gratification

The desire to experience pleasure or fulfillment without delay or deferment, often prioritizing short-term rewards over long-term outcomes.

Competitive Occupations

Jobs or careers where individuals or organizations compete against others for resources, recognition, or achievement.

Subjective Conscious Experience

Individual perception and personal awareness of feelings, thoughts, and sensations, unique to each person.

Anxiety-Arousing

Describes stimuli or situations that elicit feelings of anxiety, fear, or stress.