If the Volatility of the Underlying Asset Decreases, Then The

question 69

Multiple Choice

If the volatility of the underlying asset decreases, then the:

• A) Value of the put option will increase, but the value of the call option will decrease
• B) Value of the put option will decrease, but the value of the call option will increase
• C) Value of both the put and call option will increase
• D) Value of both the put and call option will decrease

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Definitions:

Stated Value

A value assigned to a share of stock by the corporation’s board of directors, which is an arbitrary value used for accounting purposes.

Par Common Stock

The value assigned to a share of common stock in the company's charter, not indicative of the market value.

Preferred Stock

A class of ownership in a corporation that has a higher claim on assets and earnings than common stock, often with predetermined dividend payments.

Cash

Money in the form of bills or coins, available for transactions or banking.