Which of the Following Will Cause a Decrease in the Value

question 47

Multiple Choice

Which of the following will cause a decrease in the value of the respective derivative?

• A) an increase in volatility for a call option
• B) a decrease in volatility for a call option
• C) an increase in the length to expiration for a call option
• D) an increase in the length to expiration for a put option

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Definitions:

Supply of Money

The total value of money available in an economy at a specific time, including cash, coins, and balances in bank accounts.

Tight Monetary Policy

A monetary policy strategy used by central banks to decrease the money supply and increase interest rates to control inflation and stabilize the currency.

Net Exports

The value of a country's total exports minus the value of its total imports. It is a component of a country’s GDP.

Federal Reserve System

The main banking authority in the United States, tasked with setting monetary policy, overseeing banks, ensuring the financial system's stability, and offering financial services.