Trading in an Option Determines Its Value, and Deducting Its

question 111

True/False

Trading in an option determines its value, and deducting its intrinsic value reveals the market's estimate of its time value.

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Definitions:

Critical Value

A threshold value in hypothesis testing that defines the boundary for rejecting the null hypothesis; it depends on the chosen significance level.

Null Hypothesis

A default hypothesis that there is no effect or no difference, and any observed deviation in data is due to chance.

Degrees Of Freedom

The number of independent values or quantities which can be assigned to a statistical distribution minus the number of parameters estimated.

Significance Level

The probability of rejecting the null hypothesis in a statistical test when it is true, commonly set at 0.05 or 5%.