A Longer Time to Maturity Will Unambiguously Increase the Value

question 33

Multiple Choice

A longer time to maturity will unambiguously increase the value of a call option because:
I. The longer maturity time reduces the effect of a dividend on call price.
II. With a longer time to maturity the present value of the exercise price falls.
III. With a longer time to maturity the range of possible stock prices at expiration increases.

• A) I only
• B) I and II only
• C) II and III only
• D) I, II, and III

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Definitions:

Simple Hypothesis

A hypothesis stating a direct relationship between two variables, with one variable affecting the other in a straightforward manner.

Moderator Variable

is a variable that affects the strength or direction of the relationship between two other variables in research studies.

Social Psychologist

A scientist who studies how people's thoughts, feelings, and behaviors are influenced by the actual, imagined, or implied presence of others.

Mood

A temporary state of being that affects one's feelings and emotions, often influenced by surroundings and circumstances.