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:

Aggregate Demand

The total call for goods and services within an economic system, set at a universal price level for a particular time slot.

Government Purchases

Expenditures by government entities on goods and services that contribute to a country's gross domestic product (GDP).

Nominal Interest Rate

The interest rate before adjusting for inflation, representing the surface rate at which interest is paid by a borrower for the use of money.

Exchange Rate

The price measured in one country’s currency of purchasing one unit of another country’s currency