The Premium on an Existing Call Option Should ____ When

question 47

Multiple Choice

The premium on an existing call option should ____ when there is an increase in the expected short-term volatility of the stock price.

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

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Definitions:

Decision Making

The process of selecting a course of action from multiple alternatives to achieve a specific objective.

Decision-making Process

The series of steps taken by individuals or groups to identify and evaluate options in order to choose the best course of action.

Recognition

The act of acknowledging or formally accepting the existence, validity, or legality of something.

Problem

A situation, question, or matter in need of a solution, typically requiring thought, effort, or creativity to resolve.