Compare an American call with a strike of 50 that expires in 90 days to an American call on the same underlying asset that has a strike of 60 and expires in 120 days. The underlying asset is selling at 55.

Consider the following statements:

Statement 1: “The 50 strike call is in-the-money and the 60 strike call is out-of-themoney.”

Statement 2: “The time value of the 60 strike call as a proportion of the 60 strike call’s premium exceeds the time value of the 50 strike call as a proportion of the 50 strike call’s premium.”

Are the statements most likely correct or incorrect?

a. Both statements are correct.

b. Statement 1 is incorrect but Statement 2 is correct.

c. Statement 1 is correct but Statement 2 is incorrect.