Which of the Following Statements Is CORRECT

question 23

Multiple Choice

Which of the following statements is CORRECT?

• A) Call options generally sell at a price less than their exercise value.
• B) If a stock becomes riskier (more volatile), call options on the stock are likely to decline in value.
• C) Call options generally sell at prices above their exercise value, but for an in-the-money option, the greater the exercise value in relation to the strike price, the lower the premium on the option is likely to be.
• D) Because of the put-call parity relationship, under equilibrium conditions a put option on a stock must sell at exactly the same price as a call option on the stock.
• E) If the underlying stock does not pay a dividend, it makes good economic sense to exercise a call option as soon as the stock's price exceeds the strike price by about 10%, because this permits the option holder to lock in an immediate profit.

---

Definitions:

Executory Contract

A contract under which both parties to the agreement have outstanding obligations or performance yet to be completed.

Novated

The process of replacing an original contract with a new one, transferring rights and obligations to another party.

Section 29

Without additional context, this is too vague, but it could refer to a specific section of a law or regulation depending on the context.

Ambiguous

Lacking clear definition or boundaries, open to more than one interpretation or understanding.