The Time Value of a European Option

question 19

Multiple Choice

The time value of a European option

• A)is always positive for an out-of-the-money option
• B)is always positive for an in-the-money option
• C)is always positive for an at-the-money option
• D)decreases with the time that remains until the option expires

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Definitions:

Test Statistic

A value calculated from sample data during a hypothesis test that is used to decide whether to reject the null hypothesis.

Null Hypothesis

In statistical hypothesis testing, it is the hypothesis that there is no effect or no difference, and it serves as the default or starting assumption.

Slope

In the context of linear regression, it's the amount by which the dependent variable is expected to change for a one-unit change in the independent variable.

Alternative Hypothesis

The hypothesis that proposes there is a statistically significant difference between two or more groups or variables.