Finra Exam Series-7 Topic 4 Question 11 Discussion

Actual exam question for Finra's Series-7 exam

Question #: 11
Topic #: 4

[All Series-7 Questions]

Which of the following is true about option prices?

Apremiums on options for listed stocks are usually greater than on unlisted stocks

Bpremiums on options of higher-priced stocks are usually greater than on lower-priced stocks

Cpremiums on options of well-known companies are usually larger than on lesser-known companies

Dpremiums on options of volatile stocks are usually larger than on less volatile stocks

Show Suggested Answer

Suggested Answer: D

premiums on options of volatile stocks are usually larger than on less volatile stocks. The likelihood of exercise increases with the volatility of a stock. Therefore, a higher premium is demanded.

by Merlyn at May 09, 2022, 02:01 AM

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