The Value of an Otherwise Identical American Call Option Is

question 100

Multiple Choice

The value of an otherwise identical American call option is ________ if the exercise date is ________.

• A)higher,longer
• B)lower,longer
• C)higher,closer
• D)unchanged,closer
• E)unchanged,longer

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Definitions:

Risk-averse

A description of an investor or decision-maker who prioritizes minimizing risk over achieving potentially higher gains.

Certain Payoff

A guaranteed outcome or return from an investment, where the investor has absolute certainty over the amount to be received.

Asymmetric Information

A situation in which one party in a transaction has more or superior information compared to another.

Market Failures

Situations in which the allocation of goods and services by a free market is not efficient, often leading to a net social welfare loss.