Which of the following statements is CORRECT?
A. As the stock's price rises, the time value portion of an option on a stock increases because the difference between the price of the stock and the fixed strike price increases.
B. Issuing options provides companies with a low cost method of raising capital.
C. The market value of an option depends in part on the option's time to maturity and also on the variability of the underlying stock's price.
D. The potential loss on an option decreases as the option sells at higher and higher prices because the profit margin gets bigger.
E. An option's value is determined by its exercise value, which is the market price of the stock less its striking price. Thus, an option can't sell for more than its exercise value.
Answer: C
You might also like to view...
Touch is a nonverbal communication method that varies from culture to culture. When working in the U.S., what might the best practice be regarding touching others in the workplace?
A) Only use touch to convey warmth. B) Only use touch to offer congratulatory wishes. C) Only use touch with same-sex coworkers. D) Only use touch with those of the same cultural background. E) When in doubt, don't touch.
Preferred stock normally has no voting rights. However, most preferred issues stipulate that the preferred stockholders can elect a minority number of the directors if the preferred dividend is omitted.
Answer the following statement true (T) or false (F)
What is managerial accounting and how is it used to aid decision makers?
What will be an ideal response?
Based on a five year MACRS depreciation schedule, depreciation will occur over a ____ period
A) 6 year period B) 5 year period C) 4.5 year period D) 7 year period