The Value of an Otherwise Identical Call Option Is ________

question 10

Multiple Choice

The value of an otherwise identical call option is ________ if the share price is ________.

• A)higher, lower
• B)lower, higher
• C)higher, higher
• D)None of the above.

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Definitions:

Perpetuity

An annuity that pays a fixed amount of money for an infinite amount of time.

Amortized

The process of gradually paying off a debt over time in regular installments of interest and principal sufficient to repay the loan fully by its maturity date.

Preferred Stock

A type of stock that typically pays fixed dividends and has priority over common stock in dividend payments and asset liquidation.

Perpetuity

A type of financial annuity that generates an infinite series of equal payments over an indefinable period of time.