A Stock That Pays No Dividends Has a Price of $40

question 1

Multiple Choice

A stock that pays no dividends has a price of $40. If the interest rate is zero, then which if the following statements is valid?

• A) The three-month call is worth less than the two-month call.
• B) The time value of the three-month call is the same as that of the two-month call.
• C) The insurance value of the three-month call is the same as that of the two-month call.
• D) The intrinsic value of the three-month call is less than that of the two-month call.

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Definitions:

Effective Communication

The ability to convey information to another effectively and efficiently, often considered a key skill in both personal and professional settings.

Correct Channel

The proper or most effective route or medium for communication or distribution.

Effective Message

Communication that is clearly understood, received as intended, and accomplishes its intended purpose.

Vital Signs

Measurements of the body’s most basic functions, including temperature, pulse, respiration rate, and blood pressure.