1. Which of the following statements is CORRECT?

a. 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.

*b. As a stocks 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.

c. If the company is consistently profitable, its call options will always be in the money.

d. The market value of an option depends in part on the option's length of time until expiration and on the variability of the underlying stock's price.

e. None of the above statements are correct.