In the Black-Scholes Option Pricing Model, an Increase in the Risk-Free

question 88

Multiple Choice

In the Black-Scholes option pricing model, an increase in the risk-free rate (RFR) will cause

• A) In the Black-Scholes option pricing model, an increase in the risk-free rate (RFR) will cause
• B) an increase in call value and a decrease in put value.
• C) a decrease in call value and an increase in put value.
• D) a decrease in call value and a decrease in put value.
• E) an increase in call value and an increase or decrease in put value.

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Definitions:

Marginal Costs

The additional cost incurred to produce one more unit of a good or service.

Competitive Market

A market structure characterized by a large number of sellers and buyers, where no single entity has the power to significantly influence prices or market conditions.

Marginal Revenue

The additional income received from selling one more unit of a product or service.

Average Variable Costs

The total variable costs of production divided by the quantity of output produced, indicating the cost of producing each unit.