Option Premiums Increase as the Term to Maturity Increases

question 16

True/False

Option premiums increase as the term to maturity increases.

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Definitions:

GAAP

Generally Accepted Accounting Principles; a collection of standardized guidelines and practices for financial accounting.

Income Summary

An account in the closing process that summarizes revenues and expenses for a period, transferring the net result to owner's equity.

Retained Earnings

The portion of a company's profits not distributed as dividends but reinvested in the business or kept as reserve.

Current Ratio

A liquidity ratio that measures a company's ability to pay short-term obligations or those due within one year, calculated by dividing current assets by current liabilities.