11. Consider two options with the same strike price and for the same underlying asset. The two...

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11. Consider two options with the same strike price and for the same underlying asset. The two options differ only with respect to the time to expiration. Option A expires in three months, and Option B expires in six months.

a. If the two options are call options, which option will have the higher intrinsic value (assuming the options are in the money)?

b. If the two options are call options, which option will have a higher time premium?

c. Would your answers to

(a) and

(b) be different if the option is a put rather than a call?

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Foundations Of Global Financial Markets And Institutions

ISBN: 9780262039543

5th Edition

Authors: Frank J. Fabozzi, Frank J. Jones, Francesco A. Fabozzi, Steven V. Mann

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