For European Options, What of the Effect of an Increase

question 57

Multiple Choice

For European options, what of the effect of an increase in the strike price E?

• A)Decrease the value of calls and puts ceteris paribus
• B)Increase the value of calls and puts ceteris paribus
• C)Decrease the value of calls, increase the value of puts ceteris paribus
• D)Increase the value of calls, decrease the value of puts ceteris paribus

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Definitions:

Rights

Legal entitlements or permissions granted to individuals or entities, often referring to stock rights in a corporate context, allowing shareholders to buy new shares before the general public.

Common Stockholders

Individuals or entities that own shares of common stock in a company, giving them voting rights and potential dividends.

Preferred Stockholders

Investors who own preferred shares in a company, granting them priority in dividend payments and assets in the event of liquidation over common stockholders, but typically without voting rights.

Paid-In Capital

The total amount of money that shareholders have invested in a company by purchasing its stock, excluding retained earnings.