Which of the following statements about the value of a call option at expiration is FALSE? A: The short position in the same call option can result in a loss if the stock price exceeds the exercise price. B: The value of the long position equals zero or the stock price minus the exercise price, whichever is higher. C: The value of the long position equals zero or the exercise price minus the stock price, whichever is higher. D: The short position in the same call option has a zero value for all stock prices equal to or less than the exercise price.

Essentials Of Investments
11th Edition
ISBN:9781260013924
Author:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Publisher:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Chapter1: Investments: Background And Issues
Section: Chapter Questions
Problem 1PS
icon
Related questions
Question

tHE CORRECT OPTION IS C but what is wrong with the last statement? 

The short position in the same call option has a zero value for all stock
prices equal to or less than the exercise price. - Please explain how this statement is true? please give a detailed explanation and in simple terms. 

7.
Which of the following statements about the value of a call option at
expiration is FALSE?
A: The short position in the same call option can result in a loss if the stock
price exceeds the exercise price.
B: The value of the long position equals zero or the stock price minus the
exercise price, whichever is higher.
C: The value of the long position equals zero or the exercise price minus the
stock price, whichever is higher.
D: The short position in the same call option has a zero value for all stock
prices equal to or less than the exercise price.
Transcribed Image Text:7. Which of the following statements about the value of a call option at expiration is FALSE? A: The short position in the same call option can result in a loss if the stock price exceeds the exercise price. B: The value of the long position equals zero or the stock price minus the exercise price, whichever is higher. C: The value of the long position equals zero or the exercise price minus the stock price, whichever is higher. D: The short position in the same call option has a zero value for all stock prices equal to or less than the exercise price.
Expert Solution
steps

Step by step

Solved in 3 steps

Blurred answer
Knowledge Booster
Options
Learn more about
Need a deep-dive on the concept behind this application? Look no further. Learn more about this topic, finance and related others by exploring similar questions and additional content below.
Similar questions
  • SEE MORE QUESTIONS
Recommended textbooks for you
Essentials Of Investments
Essentials Of Investments
Finance
ISBN:
9781260013924
Author:
Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Publisher:
Mcgraw-hill Education,
FUNDAMENTALS OF CORPORATE FINANCE
FUNDAMENTALS OF CORPORATE FINANCE
Finance
ISBN:
9781260013962
Author:
BREALEY
Publisher:
RENT MCG
Financial Management: Theory & Practice
Financial Management: Theory & Practice
Finance
ISBN:
9781337909730
Author:
Brigham
Publisher:
Cengage
Foundations Of Finance
Foundations Of Finance
Finance
ISBN:
9780134897264
Author:
KEOWN, Arthur J., Martin, John D., PETTY, J. William
Publisher:
Pearson,
Fundamentals of Financial Management (MindTap Cou…
Fundamentals of Financial Management (MindTap Cou…
Finance
ISBN:
9781337395250
Author:
Eugene F. Brigham, Joel F. Houston
Publisher:
Cengage Learning
Corporate Finance (The Mcgraw-hill/Irwin Series i…
Corporate Finance (The Mcgraw-hill/Irwin Series i…
Finance
ISBN:
9780077861759
Author:
Stephen A. Ross Franco Modigliani Professor of Financial Economics Professor, Randolph W Westerfield Robert R. Dockson Deans Chair in Bus. Admin., Jeffrey Jaffe, Bradford D Jordan Professor
Publisher:
McGraw-Hill Education