According to the Black/Scholes Option Valuation

question 32

Multiple Choice

According to the Black/Scholes option valuation
Model, a call option's value decreases if

• A) interest rates increase as the option approaches expiration
• B) the variability of the stock's return declines and the interest rate decreases
• C) an increase in the price of the stock results in a two for one stock split
• D the option is exercised

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Definitions:

Raw Material Purchases

Costs associated with buying materials that are directly used in the production of goods.

Credit Sales

Sales transactions in which the customer is allowed to pay for goods or services at a later date, creating accounts receivable for the seller.

Cash Disbursements

The total amount of cash payments made by a business, including expenses, purchases, and debt payments.

Material Purchases

The total cost of raw materials acquired for use in the production process.