Which of the Following Is a True Statement

question 69

Multiple Choice

Which of the following is a true statement?

• A) The actual value of a call option is greater than its intrinsic value prior to expiration.
• B) The intrinsic value of a call option is always greater than its time value prior to expiration.
• C) The intrinsic value of a call option is always positive prior to expiration.
• D) The intrinsic value of a call option is greater than its actual value prior to expiration.

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Definitions:

Call Option

An option contract that gives the holder the right, but not the obligation, to buy a specified quantity of an underlying asset at a set price within a specific period.

Strike Price

The predetermined price at which an option's contract can be exercised, allowing for the purchase or sale of the underlying asset.

Strike Price

The price at which the holder of an option contract can buy (in the case of a call option) or sell (in the case of a put option) the underlying asset.

Risk-free

An investment category that promises return payments with zero default risk, often exemplified by treasury bonds of stable governments.