The Value of a Call Option Is Positively Related to the Following

question 72

Multiple Choice

The value of a call option is positively related to the following:
I.underlying stock price;
II.risk-free rate;
III.time to expiration;
IV.volatility of the underlying stock price

• A)I only
• B)II only
• C)III only
• D)I, II, III, and IV

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Definitions:

Right to Buy

An option giving the holder the ability to purchase an asset at a predetermined price within a specified timeframe.

Employee Stock Options

A benefit offered by companies to their employees, giving them the right but not the obligation to buy the company's stock at a predetermined price during a specified period.

Intrinsic Value

The inherent, actual value of an asset, independent of its market value.

Underwater

A situation where the market value of an asset is less than the amount owed on it, often used in reference to mortgages.