Which of the Following Statements Is Most Correct, Holding Other

question 21

Multiple Choice

Which of the following statements is most correct, holding other things constant, for XYZ Corporation's traded call options?

• A) The higher the strike price on XYZ's options, the higher the option's price will be.
• B) Assuming the same strike price, an XYZ call option that expires in one month will sell at a higher price than one that expires in three months.
• C) If XYZ's stock price stabilizes (becomes less volatile), then the price of its options will increase.
• D) If XYZ pays a dividend, then its option holders will not receive a cash payment, but the strike price of the option will be reduced by the amount of the dividend.
• E) The price of these call options is likely to rise if XYZ's stock price rises.

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Definitions:

Empyema

The accumulation of pus within a naturally existing anatomical cavity, usually referring to the pleural space.

Pleural Cavity

The thin fluid-filled space between the two pulmonary pleurae (visceral and parietal) of each lung.

Pus

a thick, yellowish or greenish opaque liquid produced in infected tissue, consisting of dead white blood cells and bacteria with tissue debris and serum.

Mediastinum

The central compartment of the thoracic cavity between the lungs, containing the heart, trachea, esophagus, and other structures.