The Premium on an Existing Put Option Should ____ When

question 58

Multiple Choice

The premium on an existing put option should ____ when there is a reduction in the volatility of the underlying stock.

• A)be negative
• B)decline
• C)increase
• D)be unaffected
• E)be negative AND decline

---

Definitions:

Cost Of Goods Sold

The total cost directly associated with producing goods that have been sold, including materials, labor, and manufacturing overhead.

Materials Price Variance

The difference between the actual cost of materials and the expected (standard) cost, often used to assess purchasing performance.

Labor Rate Variance

The variance between the real labor expenses incurred and the anticipated standard labor costs for the achieved production output.

Variable Overhead Efficiency Variance

The difference between the actual variable overhead costs incurred and the expected (or standard) costs, based on the efficient use of resources.