Which of the Following Factors Increases the Price of a Put

question 47

Multiple Choice

Which of the following factors increases the price of a put option?

• A)Higher asset price, higher strike price, increased volatility, increased dividends
• B)Higher strike price, longer time to expiration, increased volatility, increased dividends
• C)Higher strike price, longer time to expiration, increased volatility, increased interest rates
• D)Longer time to expiration, increased volatility, decreasing interest rates, decreasing dividends

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Definitions:

Arbitrage Opportunities

The chance to buy an asset at a low price in one market and simultaneously sell it at a higher price in another market, earning a risk-free profit.

Expected Returns

The average return an investor anticipates on an investment, based on historical data, projected performance, and market analysis.

Factor Portfolio

A well-diversified portfolio constructed to have a beta of 1.0 on one factor and a beta of 0 on any other factor.

Well-Diversified Portfolio

A portfolio that contains a wide variety of investments across multiple asset classes to reduce risk.