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Chapter 21  Option Valuation
Chapter 21
Option Valuation
Multiple Choice Questions
1. Before expiration, the time value of an in the money call option is always
A.
equal to zero.
B.
positive.
C.
negative.
D.
equal to the stock price minus the exercise price.
E.
none of the above.
The difference between the actual option price and the intrinsic value is called the time value
of the option.
Difficulty: Easy
2. Before expiration, the time value of an in the money put option is always
A.
equal to zero.
B.
negative.
C.
positive.
D.
equal to the stock price minus the exercise price.
E.
none of the above.
The difference between the actual option price and the intrinsic value is called the time value
of the option.
Difficulty: Easy
211
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3. Before expiration, the time value of an at the money call option is always
A.
positive.
B.
equal to zero.
C.
negative.
D.
equal to the stock price minus the exercise price.
E.
none of the above.
The difference between the actual option price and the intrinsic value is called the time value
of the option.
Difficulty: Easy
4. Before expiration, the time value of an at the money put option is always
A.
equal to zero.
B.
equal to the stock price minus the exercise price.
C.
negative.
D.
positive.
E.
none of the above.
The difference between the actual option price and the intrinsic value is called the time value
of the option.
Difficulty: Easy
5. At expiration, the time value of an in the money call option is always
A.
equal to zero.
B.
positive.
C.
negative.
D.
equal to the stock price minus the exercise price.
E.
none of the above.
The difference between the actual option price and the intrinsic value is called the time value
of the option.
Difficulty: Easy
212
6. At expiration, the time value of an in the money put option is always
A.
equal to zero.
B.
negative.
C.
positive.
D.
equal to the stock price minus the exercise price.
E.
none of the above.
The difference between the actual option price and the intrinsic value is called the time value
of the option.
Difficulty: Easy
7. At expiration, the time value of an at the money call option is always
A.
positive.
B.
equal to zero.
C.
negative.
D.
equal to the stock price minus the exercise price.
E.
none of the above.
The difference between the actual option price and the intrinsic value is called the time value
of the option.
Difficulty: Easy
8. At expiration, the time value of an at the money put option is always
A.
equal to zero.
B.
equal to the stock price minus the exercise price.
C.
negative.
D.
positive.
E.
none of the above.
The difference between the actual option price and the intrinsic value is called the time value
of the option.
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This note was uploaded on 01/08/2011 for the course MBA ECON taught by Professor Hamza during the Spring '10 term at Prince Sultan University.
 Spring '10
 HAMZA
 Valuation

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