An Increase in Which One of the Following Will Reduce

question 1

Multiple Choice

An increase in which one of the following will reduce the value of a call option?

• A) Interest rate
• B) Time to expiration
• C) Volatility of stock price
• D) Exercise price

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Definitions:

Horizon Value

The value of a company or investment at the end of a specified period, considering future growth and cash flows.

Capital Structure

Capital Structure refers to the mix of debt and equity financing a company uses to fund its operations and growth, influencing its risk profile and cost of capital.

Free Cash Flows

This refers to the cash a company generates after accounting for cash outflows to support operations and maintain its capital assets. It is an indicator of a company's financial flexibility.

Conglomerate Merger

A conglomerate merger occurs between companies operating in different industries, aimed at diversification and potential synergies.