Which of the following statements is FALSE?
A)The value of an option generally decreases with the volatility of the share.
B)The 'intrinsic value' is the amount by which the option is currently in-the-money, or 0 if the option is out-of-the-money.
C)Because an American option cannot be worth less than its intrinsic value, it cannot have a negative time value.
D)An American option with a later exercise date cannot be worth less than an otherwise identical American option with an earlier exercise date.

Question

Quizplus · Accepted Answer

The value of an option generally increases with the volatility of the share, not decreases. Higher volatility increases the potential for movement in the share's price, which can increase the value of options.

Which of the Following Statements Is FALSE