If the Risk-Free Interest Rate Increases, Then

question 15

Multiple Choice

If the risk-free interest rate increases, then

• A)call option prices increase.
• B)call option prices decrease.
• C)call option prices remain the same.
• D)call option prices can either increase, decrease, or remain the same.

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Definitions:

Earnings Per Share

A financial ratio calculated by dividing a company's net profit by the number of its outstanding shares, indicating the profitability on a per-share basis.

Bonds Payable

A long-term debt instrument issued by corporations or governments that promises to pay the holder a specified sum of money at a future date plus periodic interest payments.

Lease Liability

An obligation representing the present value of future lease payments that a lessee is committed to pay over the lease term.

Mortgage Notes Payable

A legal document indicating the amount of a mortgage loan and the terms under which it is to be repaid.