Tech Com Announces a Major Expansion into Internet Services

question 14

Multiple Choice

Tech Com announces a major expansion into Internet services. This announcement causes the price of Tech Com stock to increase, but also causes an increase in the volatility of the stock price. Which of the following correctly identifies the impact of these changes on the price of Tech Com call options?

• A)Both changes cause the price of the call option to decrease.
• B)Both changes cause the price of the call option to increase.
• C)The greater uncertainty will cause the price of the call option to decrease. The higher price of the stock will cause the price of the call option to increase.
• D)The greater uncertainty will cause the price of the call option to increase. The higher price of the stock will cause the price of the call option to decrease.

---

Definitions:

Market for Cars

The economic environment involving the buying, selling, and production of automobiles.

Economics Major

An Economics Major is an academic program focusing on the study of how societies use resources to produce goods and services and distribute them among populations.

English Major

An academic concentration focused on the study of English literature, language, and writing.

$400 Dress

A dress that is being sold for $400, indicating its price point in the market.