Tele-Tech Com Announces a Major Expansion into Internet Services

question 47

Multiple Choice

Tele-Tech Com announces a major expansion into internet services. This announcement causes the price of Tele-Tech Com stock to increase, but also causes an increase in price volatility of the stock. Which of the following correctly identifies the impact of these changes on the put option of Tele-Tech Com?

• A) Both changes cause the price of the put option to decrease.
• B) Both changes cause the price of the put option to increase.
• C) The greater uncertainty will cause the price of the put option to decrease. The higher price of the stock will cause the price of the put option to increase.
• D) The greater uncertainty will cause the price of the put option to increase. The higher price of the stock will cause the price of the put option to decrease.
• E) The greater uncertainty has no direct effect on the price of the put option. The higher price of the stock will cause the price of the put option to decrease.

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