According to the Black/Scholes Option Valuation Model, a Call Option's

question 19

Multiple Choice

According to the Black/Scholes option valuation model, a call option's value decreases if

• A)interest rates increase as the option approaches expiration
• B)the variability of the stock's return decline and the interest rate decreases
• C)an increase in the price of the stock results in a two for one stock split
• D)the option is exercised

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Definitions:

Conventional

Pertaining to commonly accepted norms or standards.

Growth Spurt

A rapid increase in growth rate, especially in height and weight, commonly observed during puberty.

Puberty

The stage in life when a person develops secondary sex characteristics and becomes capable of reproduction.

Physical Changes

Alterations in the form, appearance, or state of matter of a substance without changing its chemical composition.