FIN 534 RANK Imagine Your Future /fin534rank.com FIN 534 RANK Imagine Your Future /fin534rank.com - Page 86

FOR MORE CLASSES VISIT www.fin534rank.com Which of the following statements is CORRECT? a. Put options give investors the right to buy a stock at a certain strike price before a specified date. b. Call options give investors the right to sell a stock at a certain strike price before a specified date. c. Options typically sell for less than their exercise value. d. LEAPS are very short-term options that were created relatively recently and now trade in the market. e. An option holder is not entitled to receive dividends unless he or she exercises their option before the stock goes ex dividend. 2. Which of the following statements is CORRECT? a. If the underlying stock does not pay a dividend, it makes good economic sense to exercise a call option as soon as the stock’s price exceeds the strike price by about 10%, because this permits the option holder to lock in an immediate profit. b. Call options generally sell at a price less than their exercise value. c. If a stock becomes riskier (more volatile), call options on the stock are likely to decline in value.