Final answer:
In a bull call spread, an investor buys a call option at a lower exercise price and sells a call option at a higher exercise price, anticipating that the spread will narrow as the underlying asset's price moderately increases. Option D
Step-by-step explanation:
In a bull call spread, the correct statement is that the investor buys the lower exercise price (I) and sells the higher exercise price (III). This strategy involves purchasing a call option with a lower strike price and simultaneously selling a call option with a higher strike price, aiming to profit from a moderate increase in the underlying asset's price.
By doing so, the investor benefits from the potential price appreciation of the asset while mitigating the overall cost of the trade through the premium received from selling the higher strike call. As the underlying asset's price rises, the spread between the two options narrows, leading to a potential profit for the investor. Therefore, the correct answer is D) I and III.