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1. Why do options sell at prices higher than their exercise values? 2. What happens to the time value of an option as the stock

1. Why do options sell at prices higher than their exercise values?

2. What happens to the time value of an option as the stock prices rises? Why?

3. Explain why the minimum exercise value of an option is zero.

4. Explain why the option on an extremely volatile stock is worth more than one on a very stable stock.

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