Which of the Following Correctly Identifies the Impact of These

question 61

Multiple Choice

Which of the following correctly identifies the impact of these changes on the put option of Tele-Tech Com?

• A) Both changes cause the price of the put option to decrease.
• B) Both changes cause the price of the put option to increase.
• C) The volatility normally will have a positive effect on the price of the put option, but the lower price of the stock will cause the price of the put option to increase.
• D) The volatility normally will have a negative effect on the price of the put option while the lower price of the stock will cause the price of the put option to decrease.
• E) Volatility has no direct effect on the price of the put option while the lower price of the stock will cause the price of the put option to decrease.

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Definitions:

Stock Dividends

A form of dividend paid by a company to its shareholders in the form of additional shares, rather than cash.

Market Price

The current price at which an asset or service can be bought or sold in a public market.

Stock Dividends Distributable

A portion of a company's earnings allocated to shareholders in the form of additional shares, rather than cash, typically at a fixed rate.

Retained Earnings

The portion of net income that is retained by a company rather than distributed to its shareholders as dividends.