Which of the Following Statements Regarding 'American-Type' Call Options Is

question 19

Multiple Choice

Which of the following statements regarding 'American-type' call options is false?

• A)The higher the current share price,the greater the call price.
• B)The higher the exercise price,the lower the call price.
• C)The call price is greater,the longer the term to expiry.
• D)The lower the risk-free interest rate,the higher the call price.

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Definitions:

Equity Method

An accounting technique used by companies to assess the profits earned by their investments in other companies, reflecting the profit share in their income statements.

Land Transfer

The process of transferring ownership of land from one party to another through sale, gift, or inheritance.

Consolidating Entries

Journal entries made in preparation of consolidated financial statements to remove effects of intercompany transactions.

Straight-Line Depreciation

A method of distributing the cost of an asset evenly across its useful life, where the asset's value decreases by a fixed amount each year.