Which One of the Following Changes Will Decrease the Value

question 19

Multiple Choice

Which one of the following changes will decrease the value of a call option?

• A) An increase in the stock price
• B) An increase in the strike price
• C) An increase in the volatility of the stock price
• D)An increase in interest rates

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Definitions:

DCF Approach

A valuation method that estimates the value of an investment based on its expected future cash flows, adjusted for the time value of money.

Cost of Equity

The return that investors expect for investing in a company's equity, considering the risk of the investment.

Retained Earnings

The portion of a company's profits that is kept or retained for reinvestment in the business, rather than being paid out as dividends.

Retained Earnings

Portion of a company's profits that is kept or retained within the company, rather than paid out to shareholders as dividends, for reinvestment in the business or to pay off debt.