Homework answers / question archive / Question 7 1 pts Which of the following statements is CORRECT? An option to buy a stock will generally be priced below its exercise value, and the lower the exercise value, the lower the premium on the option is likely to be

Question 7 1 pts Which of the following statements is CORRECT? An option to buy a stock will generally be priced below its exercise value, and the lower the exercise value, the lower the premium on the option is likely to be

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Question 7 1 pts Which of the following statements is CORRECT? An option to buy a stock will generally be priced below its exercise value, and the lower the exercise value, the lower the premium on the option is likely to be. If Larry writes a call option against a stock held in his portfolio he is said to be selling an "out-of-the-money" option. Because of their levered return profile, call options will typically sell for a price that is less than their intrinsic value. John wrote an at the money put option. If the price of the stock rises above the strike price by the time the option expires, John will profit.
Question 8 1 pts Harry thinks Big Slop Inc's stock price is going to decline from its current level of $82.50 sometime during the next 4 months. Harry can buy a 4-month put option on Big Slop's stock for $5.10. The put option has a strike price of $85.00. If Harry bought this option for $5.10 and Big Slop's stock price dropped to $60 by the time the option expires, what would Harry's profit be? $19.90 -$5.10 $22.50 0 0 0 0 $25.00 $17.40