Which One of the Following Will Cause the Value of a Call

question 25

Multiple Choice

Which one of the following will cause the value of a call to decrease?

• A)Lowering the exercise price
• B)Increasing the time to expiration
• C)Increasing the risk-free rate
• D)Lowering the risk level of the underlying security
• E)Increasing the stock price

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Definitions:

GAAP

Generally Accepted Accounting Principles, a collection of commonly-followed accounting rules and standards used in financial reporting within the United States.

Proprietorships

A business structure where a single individual owns and runs the business, bearing unlimited liability for its debts and obligations.

Partnerships

A business organization legally constituted by multiple individuals who jointly manage the enterprise and share in its profits.

Corporations

Legal entities that are separate from their owners, capable of owning assets, incurring liabilities, and being taxed; they raise capital through issuing stock.