Which of the Following Statements Is Most Correct, Holding Other

question 23

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:

Infinite

Describing a quantity without end or limit, often used in mathematics or to describe concepts that cannot be quantified.

Terms

Defined words or expressions with specific meanings within a particular context or field.

Geometric Series

A series of numbers in which every number, starting with the second, is the result of multiplying the one before it by a consistent, non-zero value referred to as the ratio.

Infinite

Something that has no end or limit, often used in mathematics and physics to describe quantities or concepts without bounds.