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:

Compete

To strive against others for the purpose of achieving a goal, an award, or superiority in a field.

Partnership

A business arrangement where two or more individuals share ownership, profits, and liabilities of a business venture.

Consent

Agreement or permission given by a party for something to happen or be done.

Notice

A formal declaration or statement that informs parties of certain facts, obligations, or legal processes.