The Value of a Listed Call Option on a Stock

question 89

Multiple Choice

The value of a listed call option on a stock is lower when:
I. The exercise price is higher.
II. The contract approaches maturity.
III. The stock decreases in value.
IV. A stock split occurs.

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

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Definitions:

Covalent Bond

A covalent bond is a chemical bond formed when two atoms share one or more pairs of electrons, strongly binding them together in a molecule.

Polysaccharides

Large molecules composed of long chains of monosaccharide units bonded together, serving various functions such as storage and structural roles in plants and animals.

Triacylglycerols

Lipids formed by three fatty acids linked to a glycerol molecule; a main form of energy storage in animals.

Phospholipids

Lipids in which two fatty acids and a phosphorus-containing group are attached to glycerol; major components of cell membranes.