Which of the Following Statements Is CORRECT

question 26

Multiple Choice

Which of the following statements is CORRECT?

• A) as the stock's price rises, the time value portion of an option on a stock increases because the difference between the price of the stock and the fixed strike price increases.
• B) issuing options provides companies with a low cost method of raising capital.
• C) the market value of an option depends in part on the option's time to maturity and also on the variability of the underlying stock's price.
• D) the potential loss on an option decreases as the option sells at higher and higher prices because the profit margin gets bigger.
• E) an option's value is determined by its exercise value, which is the market price of the stock less its striking price. thus, an option can't sell for more than its exercise value.

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Definitions:

Logical Extensions

The process of expanding on an idea, argument, or theory by drawing reasonable conclusions or further implications based on its logic.

Language Shift

The process by which a speech community in a contact situation (such as migration) gradually stops using their original language in favor of another language.

Accelerated Bilingualism

The rapid acquisition of proficiency in two languages, often facilitated by immersive or intensive language learning environments.

Vocabulary Explosion

The rapid increase in a child's vocabulary, often observed between the ages of two and six years.