Assuming All Else Equal,the Value of an In-The-Money Call Increases

question 67

Multiple Choice

Assuming all else equal,the value of an in-the-money call increases when:
I.the time to expiration increases.
II.the stock price increases.
III.the risk-free rate of return increases.
IV.the volatility of the price of the underlying stock increases.

• A)I and III only
• B)II,III,and IV only
• C)I,III,and IV only
• D)I,II,and III only
• E)I,II,III,and IV

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Definitions:

Cash Flow

The complete spectrum of financial inflow and outflow in a business, vitally affecting its liquidity.

Stockholders

Individuals or entities that own shares in a corporation, giving them certain rights like voting on corporate affairs.

Tax Rate

The chunk of financial earnings a corporation or individual pays as tax.

Depreciation Expense

Breaking down the cost of a hard asset over its life of utility.