11. Which statement is CORRECT? a)An option is out of the money if its exercise
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Question
11. Which statement is CORRECT?
a)An option is out of the money if its exercise value is negative.
b)An option is in the money as long as the option price is positive.
c)The time value of an option is highest when the spot price equals the strike price.
12. Which of the following statements concerning risk management is NOT correct?
b. Risk management makes sense for firms directly engaged in activities that involve commodities whose values can be hedged, and it doesn’t make much sense for most other firms.
c. Companies with volatile earnings pay more taxes than more stable companies due to the treatment of tax credits and the rules governing corporate loss carry-forwards and carry-backs. Therefore, our tax system encourages risk management to stabilize earnings.
d. Risk management benefits managers who are at risk for being fired if results are poor.
17. _______________ risks have the potential for gains or losses.
a)Financial
b)Insurable
d)Speculative
Explanation / Answer
a)Financial
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