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      Question

      Price of an option expiring three months from today will

      be higher than price of an option expiring in two months from today.
      A Incomplete Data Correct Answer Incorrect Answer
      B Depends if it’s a Call or a Put option Correct Answer Incorrect Answer
      C True Correct Answer Incorrect Answer
      D False Correct Answer Incorrect Answer

      Solution

      Option Premium = Intrinsic Value + Time value The longer the period to expiry, higher the option premium (price) because the time value component will be higher.

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