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.

---

Definitions:

Sales Price

The amount of money charged for a product or service in the market.

Current Profits

The amount of net income that a company has generated during the current fiscal period, reflecting its financial performance in the short term.

Production

The process of creating, manufacturing, or assembling goods and services.

Absorption Costing

A method of inventory costing that includes all manufacturing costs - direct materials, direct labor, and both variable and fixed manufacturing overhead - in the cost of a product.