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:

Investment Banker

A professional who works in a financial services company or division that specializes in raising capital for companies, governments, or other entities.

Initial Margin

The upfront payment required when opening a position in the futures market, serving as a guarantee for future contract fulfillment.

Primary Market

The market in which new issues of securities are offered to the public.