For a $150/£ Call Option with an Initial Premium of $0

question 19

Multiple Choice

For a $1.50/£ call option with an initial premium of $0.033/£ and a lambda of 0.4, after an increase in annual volatility of 1 percent point - for example from 10% to 11% - the new option premium would be:

• A) $0.036/£.
• B) $0.037/£.
• C) $0.004/£.
• D) $1.54/£.

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Definitions:

Bond Quoted

The price or rate at which a bond is currently trading in the market.

Purchase Cost

The total expenditure incurred to acquire a good or service, including the purchase price and additional expenses.

Accrued Interest

Interest that has been earned but not yet received or paid out, commonly associated with bonds and loans.

Commission

Payment to an employee or to an agent for performing or helping to perform a business transaction or service.