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Fundamentals of Financial Manageme...

15th Edition
Eugene F. Brigham + 1 other
ISBN: 9781337395250

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BuyFindarrow_forward

Fundamentals of Financial Manageme...

15th Edition
Eugene F. Brigham + 1 other
ISBN: 9781337395250
Textbook Problem

Why do options typically sell at prices higher than their exercise values?

Summary Introduction

To discuss: The reason why options sell at a higher price as compared to their exercise value.

Introduction:

A contract to purchase a financial asset from one party and sell it to another party on an agreed price for a future date is termed as Option.

Explanation

The reason why options sell at a higher price as compared to their exercise value is as follows:

The option’s market value is higher as compared to its exercise price because of the speculative nature of the investment...

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