Which One of the Following Will Cause the Value of a Call

question 72

Multiple Choice

Which one of the following will cause the value of a call to decrease?

• A) lowering the exercise price
• B) increasing the time to expiration
• C) increasing the risk-free rate
• D) lowering the risk level of the underlying security
• E) increasing the stock price

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Definitions:

Market Value

The current price at which an asset or service can be bought or sold in a public market.

Historical Cost

The original financial value of an asset or investment at the time of its acquisition.

GAAP

The set of accounting principles, standards, and procedures that companies use to compile their financial statements. GAAP is used to ensure consistency and comparability across organizations.

Debt-For-Debt

A restructuring process where a company replaces or swaps one form of debt with another, like changing the terms or the type of loan.