Which of the Following Will Decrease the Value of a Call

question 97

Multiple Choice

Which of the following will decrease the value of a call option?
I.a decrease in the exercise price
II.a decrease in the value of the underlying security
III.an increase in the risk-free rate
IV.an increase in the time to expiration

• A)II only
• B)I and II only
• C)III and IV only
• D)I, II, and IV only
• E)I, II, and III only

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Definitions:

Consumer's Surplus

The difference between what consumers are willing to pay for a good or service and what they actually pay, representing the benefit consumers receive from the purchase.

Earplugs

Small devices inserted into the ear canal to protect the ears from loud noises, water, or foreign bodies.

Consumer's Surplus

The difference between the total amount that consumers are willing and able to pay for a good or service versus the total amount they actually pay.

Earplugs

Small devices inserted into the ear canal to protect the ears from loud noises, water, or to block out sound for concentration or sleep.