Which one of the following statements concerning the relationship between time to option maturity and call and put prices is correct?
A)Put and call prices increase at the same rate as the time to option maturity increases.
B)Put prices and time to maturity are inversely related.
C)Call prices tend to increase faster than put prices as the time to option maturity increases.
D)Put prices increase while call prices remain constant as the time to option maturity increases.
E)Call prices are inversely related to time to maturity.

Question

Quizplus · Accepted Answer

Call options tend to increase in value as the time to maturity increases because the longer time frame gives the underlying asset more opportunity to increase in price, which benefits the call option holder. Put options also can increase in value with more time, but the effect is generally more pronounced for call options due to the potential for unlimited upside with rising stock prices.

Which One of the Following Statements Concerning the Relationship Between