If the Price of the Underlying Stock Decreases, Then the Value

question 1

Multiple Choice

If the price of the underlying stock decreases, then the value of the call options ________ and the value of the put options ________.

• A) decrease; decrease
• B) decrease; increase
• C) increase; decrease
• D) increase; increase
• E) increase; remain unchanged

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Definitions:

Pledging

The act of using an asset as collateral to secure a loan, without transferring ownership of the asset.

Administrative Reason

A justification based on policy, procedure, or bureaucracy within an organization.

Unexpected Opportunities

Situations or prospects that were not previously planned for or considered that could benefit the company or individual.

Secured Loan Agreement

A loan agreement in which the borrower pledges an asset as collateral for the loan, which the lender can seize if the loan is not repaid.