Which of the Following Call Options Would Command the Higher

question 51

Multiple Choice

Which of the following call options would command the higher premium,other things equal?

• A) October 1996 expiration, $45 strike price
• B) December 1996 expiration, $40 strike price
• C) March 1997 expiration, $45 strike price
• D) June 1997 expiration, $40 strike price

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Definitions:

2-for-1 Stock Split

A corporate action where a company divides its existing stock into two, reducing the price of each share for investors while maintaining the overall value of their investment.

Information Content Effect

The impact on a company's stock price when new information becomes available to market participants.

Clientele Effect

The theory that a company's stock price changes can attract different types of investors based on dividend policy or other corporate actions.

Efficient Markets Hypothesis

The Efficient Markets Hypothesis (EMH) posits that all known information is already reflected in stock prices, making it impossible to consistently achieve higher returns through stock market predictions.