The Value of a Call Option Increases as the Time

question 72

Multiple Choice

The value of a call option increases as the time to expiration increases because:

• A) the exercise price continually decreases.
• B) the opportunity increases for the stock price to exceed the exercise price.
• C) the dividends accumulate while waiting to be paid.
• D) the option can be repeatedly exercised.

Understand the principles and conditions that affect the validity and expiration of an offer.

Grasp the method by which acceptance of an offer can be communicated and the impact of specific forms of acceptance.

Identify and explain the rules surrounding the revocation of an offer and its effects.

Comprehend different types of contracts (bilateral, unilateral, implied, express) and recognize their characteristics and legal implications.

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Definitions:

Systematic Risk

The risk inherent to the entire market or market segment, which cannot be mitigated through diversification alone, also known as market risk.

Equilibrium-Price Relationship

The point at which the supply of a good matches its demand, resulting in a stable market price.

Large Position

Holding a significant quantity of a particular stock, bond, or other financial asset, influencing potential risk and return.

Dominance Argument

A concept in portfolio theory suggesting that if one investment dominates another on all measures of performance, it is the preferable choice.