Which One of the Following Statements Related to Options Is

question 43

Multiple Choice

Which one of the following statements related to options is correct?

• A) American stock options can be exercised but not resold.
• B) A European call is either equal to or less valuable than a comparable American call.
• C) European puts can be resold but can never be exercised.
• D) European options can be exercised on any dividend payment date.
• E) American options are valued using the Black-Scholes option pricing model.

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Definitions:

Put Contract

A financial contract giving the holder the right, but not the obligation, to sell a specified amount of an underlying security at a specified price within a specified time.

Writer of a Call Option

The individual or entity that sells a call option and has the obligation to sell the underlying asset at the set strike price if the option is exercised.

Buyer of a Put Option

An investor who acquires the right, but not the obligation, to sell a specified amount of an underlying asset at a predetermined price within a set time frame.

Underlying Asset

The financial asset upon which a derivative's price is based, including stocks, bonds, commodities, currencies, interest rates, and market indexes.