All Else the Same, an Increase in the Risk-Free Rate

question 56

Multiple Choice

All else the same, an increase in the risk-free rate will __________ the price of a call option and __________ the price of a put option.

• A) increase; increase
• B) increase; decrease
• C) decrease; decrease
• D) decrease; increase
• E) not affect; not affect

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Definitions:

Communism

Communism is a socio-economic system characterized by the absence of private property and the communal ownership of all resources and means of production, aiming for a classless society.

Economic Well-being

A measure of the financial health and quality of life of individuals or populations, often assessed by factors like income, employment, and access to goods and services.

Central Planners

Individuals or government authorities tasked with overseeing the economic direction and allocation of resources within a centrally planned economy.

Opportunity Cost

The financial downside of skipping over the second-best opportunity when a decision is on the line.