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:

Recall

The act of retrieving information or memories from one's past experiences.

Recognition

The cognitive process of identifying previously encountered objects, ideas, or situations, indicating a form of memory retrieval.

Reaction Range

The concept that genetic factors set certain limits on cognitive, emotional, and personality development, but environmental factors determine where within these limits individuals will fall.

Achievement

The accomplishment of a task or goal through effort, skill, or courage, often recognized and valued by society or the individual's personal standards.