According to the Black/Scholes Option Valuation Model, the Value of a Call

question 5

Multiple Choice

According to the Black/Scholes option valuation model, the value of a call option increases if

• A)the option approaches expiration
• B)the return on the stock is more certain
• C)interest rates on a discounted bond decline
• D)the standard deviation of the stock's return increases

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Definitions:

Economic Activity

Economic activity refers to the actions that involve the production, distribution, and consumption of goods and services within an economy.

Marginal Analysis

An examination of the benefits and costs of increasing or decreasing a unit of production or consumption.

Hungry

The physical sensation of needing or wanting to eat; a condition resulting from not consuming enough food.

Slice of Pizza

A single triangular piece cut from a round pizza, typically topped with cheese, tomato sauce, and various toppings.