An Increase in the Exercise Price, All Other Things Held

question 54

Multiple Choice

An increase in the exercise price, all other things held constant, will ________ the premium on call options.

• A) increase
• B) decrease
• C) increase or decrease
• D) Not enough information is given.

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Definitions:

Demand Schedule

A table or graph showing the quantity of a good or service that consumers are willing and able to purchase at various prices over a given period.

Marginal Utility

The extra pleasure a customer receives from using an additional unit of a product or service.

Consumer Surplus

The discrepancy between the amount consumers are prepared to pay for a product or service and the actual price they pay.

Utility

A measure of satisfaction, usefulness or value that a consumer receives from any good or service.