Which of the Following Statements Is Correct

question 15

Multiple Choice

Which of the following statements is correct?

• A)If the underlying stock does not pay a dividend, it does not make good economic sense to exercise a call option prior to its expiration date, even if this would yield an immediate profit.
• B)Call options generally sell at a price greater than their exercise value, and the greater the exercise value, the higher the premium on the option is likely to be.
• C)Call options generally sell at a price below their exercise value, and the greater the exercise value, the lower the premium on the option is likely to be.
• D)Call options generally sell at a price below their exercise value, and the lower the exercise value, the lower the premium on the option is likely to be.

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Definitions:

Paperback Novels

Books printed on lower quality paper, bound in a soft cover, and typically less expensive than hardcover editions.

Good X

A placeholder term used to represent any market commodity or product for the sake of economic analysis or discussion.

Income

Total earnings derived from labor, investments, and any other source, typically discussed in the context of individuals or households.

Income

Funds accrued regularly from work performed or assets invested.