If the Risk-Free Interest Rate Increases

question 29

Multiple Choice

If the risk-free interest rate increases:

• A) the direct effect of it on the call option price is positive
• B) the direct effect of it on the call option price is negative
• C) the direct effect of it on the call option price is unknown
• D) none of the above

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Definitions:

Welfare Payments

Government-provided financial aid to individuals or families, intended to support those who are unable to support themselves.

Income Tax

A tax levied by governments on individuals' or entities' income, including earnings from employment, business profits, and investments.

Automatic Stabilizers

Economic policies and programs, such as unemployment insurance and taxation, designed to automatically adjust to help stabilize an economy.

Aggregate Demand

The total demand for all goods and services within an economy at a given overall price level and within a given time period.