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23. There are call options on the common stock of XYZ Corporation. Which of the following best describes the factors that affect call option values?
23. There are call options on the common stock of XYZ Corporation. Which of the following best describes the factors that affect call option values? a. The price of call options will decrease if XYZ's stock price rises. b. The higher the strike price, the lower the call option price. c. Assuming the same strike price, a call option that expires in I month will sell for a higher price than one that expires in 3 months. The less volatile a stock's price, the more valuable a call option on the stock is. If the risk-free rate of interest increases, the value of call options will decrease. d. e. 24. A 6-month put option on Smith Corp.'s stock has a strike price of $45 and sells in the market for $8.90. Smith's current stock price is $41. What is the option premium? a. $4.41 b. $4.90 c. $5.39 d. $5.93 e. $6.52 25. Which of the following statements is CORRECT? An option's value is determined by its exercise value, which is the market price of the stock less its strike price. Thus, an option can't sell for more than its exercise value. As a stock's price increases, the premium portion of an option on that stock increases because the difference between the stock price and the fixed strike price increases. a. b. c. If the company is consistently profitable, its call options will always be in the d. The market value of an option depends in part on the option's length of time e. None of the above statements are correct. money until expiration and on the variability of the underlying stock's price
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