Which One of the Following Is Equal to the Option

question 7

Multiple Choice

Which one of the following is equal to the option premium minus the intrinsic value?

• A) parity value
• B) payoff value
• C) time value
• D) strike value
• E) profit

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Definitions:

Par Preferred Stock

A type of preferred stock that has a nominal face value, which is the amount paid out to shareholders during liquidation before common stockholders.

Preferred Stock

A class of ownership in a corporation that has a higher claim on its assets and earnings than common stock, usually with dividends that are paid out prior to those to common stockholders.

Common Stock

A type of equity security that represents ownership in a corporation, with holders typically having voting rights and receiving dividends.

Market Price

The present rate at which a good or service is available for purchase or sale in an open market.