Other Things Equal, the Price of a Stock Call Option

question 6

Multiple Choice

Other things equal, the price of a stock call option is positively correlated with which of the following factors?

• A) The stock price
• B) The time to expiration
• C) The stock volatility
• D) The exercise price
• E) The stock price, time to expiration, and stock volatility

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Definitions:

Long-Duration Bonds

Bonds with a long time remaining until maturity, typically more sensitive to interest rate changes and offering potentially higher yields.

Zero-Coupon Bond

A debt security that does not pay interest but is traded at a deep discount, offering profit at maturity when it reaches face value.

Duration

A measure of the sensitivity of the price of a bond or other debt instrument to changes in interest rates, typically expressed in years.

Bond Convexity

A measure of the curvature or the degree of the curve in the relationship between bond prices and bond yields, demonstrating how the duration of a bond changes as the interest rate changes.