The Greater the Volatility of the Underlying Stock, the ____

question 27

Multiple Choice

The greater the volatility of the underlying stock, the ____ the call option premium and the ____ the put option premium. ​

• A)higher; lower
• B)lower; higher
• C)higher; higher
• D)lower; lower

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Definitions:

Least Squares Regression Line

A straight line that minimizes the sum of the squared differences between observed and predicted values in a dataset.

Slope

In the context of a linear equation, slope represents the rate of change between two variables, indicating how much one variable changes for a unit change in another variable.

Predicted Value

The estimated outcome based on a statistical model or regression analysis.

Least Squares Regression Line

This is a straight line that best fits the data on a scatter plot, minimizing the sum of the squares of the vertical distances of the points from the line.