Why Is the Value of a Call Option Said to Increase

question 76

Multiple Choice

Why is the value of a call option said to increase as the interest rate increases?

• A) The stock seller must pay the call owner more interest.
• B) The present value of the strike price is reduced.
• C) As interest rates increase, stock prices increase.
• D)Interest rate increases reduce the option premium.

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Definitions:

Ground State

The lowest energy state of an atom

UV Radiation

Electromagnetic radiation with a wavelength shorter than that of visible light but longer than X-rays, which can have effects such as causing skin burns or promoting vitamin D synthesis.

Chloroplasts

Organelles found in the cells of green plants and photosynthetic algae that conduct photosynthesis, converting light energy, water, and carbon dioxide into oxygen and glucose.

Greatest Density

Refers to the point at which a substance is at its highest mass per unit volume, often occurring at specific conditions of temperature and pressure.