All Other Factors Constant, the Higher the Short-Term, Risk-Free Interest

question 7

Multiple Choice

All other factors constant, the higher the short-term, risk-free interest rate, the ________ the cost of buying the underlying asset and carrying it to the ________ of the call option.

• A) greater; expiration date
• B) lower; maturity date
• C) greater; ex-dividend date
• D) lower; salvage date

---

Definitions:

Operating Revenues

Income generated from the core business activities of an entity excluding non-operating income sources.

Remeasurement

The process of converting foreign currency amounts into a functional currency using exchange rates that reflect changes in market conditions.

Translation

The process of converting the financial statements of a foreign subsidiary into the reporting currency of the parent company, according to appropriate accounting standards.

Purpose

The underlying motive or reason for the creation or existence of something.