At expiration, the value of an option:
A. is equal to the intrinsic value.
B. is less than the intrinsic value.
C. is equal to the time value of the option.
D. is greater than the intrinsic value.
Answer: A
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Two goods are substitutes if a decrease in the price of one raises the quantity demanded of the other.
Answer the following statement true (T) or false (F)
Figure 6-2
In Figure 6-2, the price elasticity of demand (dropping all minus signs) is ____ between P = 4 and P = 6 than between P = 10 and P = 12 because between the lower set of prices the percentage change in price is ____.
A. smaller; smaller B. smaller; greater C. greater; smaller D. greater; greater
Believers in a fixed-rule approach to stabilization policy propose that
A. Congress should balance the high employment budget. B. the Fed should keep the money supply growth constant. C. the economy be stabilized by automatic mechanisms. D. All of these responses are correct.
The marginal benefit from pollution abatement
A. decreases as pollution abatement increases because of the law of diminishing marginal utility. B. is constant as pollution abatement increases because pollution abatement is valued for its own sake and not for the utility it provides. C. decreases as pollution abatement increases because of the law of diminishing marginal product. D. increases as pollution abatement increases because people learn to want an even cleaner environment as the environment gets cleaner.