I Hold a Long Position in a Call Option on IBM

question 13

Multiple Choice

I hold a long position in a call option on IBM stock. If the price of IBM goes down and its volatility goes up, then the value of my call option

• A) Increases.
• B) Decreases.
• C) Is unaffected.
• D) May increase, decrease, or stay the same.

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Definitions:

Default Chance

The probability that a borrower will fail to meet the obligations of a loan or debt.

Monthly Interest Rate

The percentage of a sum of money charged for its use per month, often used in reference to loans or credit balances.

Accounts Receivable Balance

The aggregate sum of funds that customers owe a company for products or services that have been provided but remain unpaid.

Operating Cycle

The duration of time from the purchase of inventory to the collection of receivables from sales, outlining how long it takes for a company to turn investments in inventory into cash.