Which One of the Following Will Cause the Value of a Call

question 25

Multiple Choice

Which one of the following will cause the value of a call to decrease?

• A)Lowering the exercise price
• B)Increasing the time to expiration
• C)Increasing the risk-free rate
• D)Lowering the risk level of the underlying security
• E)Increasing the stock price

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Definitions:

Accrual Basis

An accounting method where revenues and expenses are recorded when they are earned or incurred, regardless of when cash transactions happen.

Cash Basis

An accounting method where revenues and expenses are recognized when cash is received or paid, rather than when earned or incurred.

Indirect Method

A way of presenting the cash flow statement where net income is adjusted for the effects of transactions that do not involve cash.

Exchange

is a marketplace where securities, commodities, derivatives, or other financial instruments are traded.