The Difference Between the Intrinsic Value of an Option and Its

question 10

Multiple Choice

The difference between the intrinsic value of an option and its actual value is:

• A)the payoff
• B)the premium
• C)the time value
• D)the underlying asset cost

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Definitions:

Operating Cycle

The duration it takes for a company to buy inventory, sell products, and collect cash from sales, showing the efficiency of its operations.

Interest-Bearing Note

A debt instrument that pays interest to the holder, usually at a fixed rate, until the principal is repaid.

Face Value

The nominal or original value printed on a financial instrument, such as a bond or stock certificate.

Notes Payable

Notes payable are written agreements where a borrower agrees to pay back the principal amount along with interest to a lender at a future date.