Which of the following statements is CORRECT? a. Call options generally sell at

Question

  Which of the following statements is CORRECT?

a.     Call options generally sell at a price greater than their exercise value, and the greater the exercise value, the higher the premium on the option is likely to be.

b.    Call options generally sell at a price below their exercise value, and the greater the exercise value, the lower the premium on the option is likely to be.

c.     Call options generally sell at a price below their exercise value, and the lower the exercise value, the lower the premium on the option is likely to be.

d.    Because of the put-call parity relationship, under equilibrium conditions a put option on a stock must sell at exactly the same price as a call option on the stock.

e.     If the underlying stock does not pay a dividend, it does not make good economic sense to exercise a call option prior to its expiration date, even if this would yield an immediate profit.

Explanation / Answer

The answer is ,,,

E.If the underlying stock does not pay a dividend, it does not make good economic sense to exercise a call option prior to its expiration date, even if this would yield an immediate profit.

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