As Interest Rates Increase, a Long Call Option Position on a Bond

question 15

True/False

As interest rates increase, a long call option position on a bond decreases in value.

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Definitions:

Economies of Scale

The cost advantage that arises with increased output of a product due to spreading fixed costs over more units of production.

Minimum Efficient Scale

The smallest level of production a firm can achieve while still taking full advantage of economies of scale regarding costs per unit.

Economies of Scale

The cost advantages that enterprises obtain due to their scale of operation, leading to a reduction in average costs with increased output.