New Tek Announces a Major Expansion Which Causes the Price

question 40

Multiple Choice

New Tek announces a major expansion which causes the price of its stock to increase and also causes an increase in the volatility of the stock price.How will these two reactions affect the value of put options on this stock?

• A)Both reactions will decrease the value.
• B)Both reactions will increase the value.
• C)Neither reaction will affect put option values.
• D)The reactions will have offsetting effects on the value.
• E)The change in volatility will have no effect while the increased stock price will decrease the value.

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Definitions:

Clot Formation

The process by which blood changes from a liquid to a gel, forming a clot, which is essential in preventing excessive bleeding when blood vessels are injured.

Thrombin

An enzyme in blood plasma that causes the clotting of blood by converting fibrinogen to fibrin.

Prothrombin

A protein present in blood plasma that is converted into active thrombin during coagulation, playing a key role in blood clot formation.

Fibrinogen

A soluble plasma protein that is converted to the insoluble protein fibrin during blood clotting.