A Decrease in Which of the Following Will Increase the Value

question 18

Multiple Choice

A decrease in which of the following will increase the value of a put option on a stock?

• A) Strike price and standard deviation of the returns on the underlying stock
• B) Stock price and risk-free rate
• C) Time to expiration and strike price
• D) Risk-free rate and standard deviation of the returns on the underlying stock
• E) Time to expiration and stock price

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Definitions:

Operating Costs

Expenses related to the day-to-day functioning of a business, excluding costs associated with production or acquisition of goods.

Total Cost

The complete sum of all expenses incurred in producing, acquiring, or carrying out an activity or service, including direct, indirect, fixed, and variable costs.

Best Alternative

The most favorable option available to a decision-maker when multiple choices are present.

Operating Costs

Expenses associated with the day-to-day functions of running a business, including costs for rent, utilities, payroll, and materials.