In the Valuation of an Option Contract, the Following Statements

question 2

Multiple Choice

In the valuation of an option contract, the following statements apply except

• A) the value of an option increases with its maturity.
• B) there is a negative relationship between the market interest rate and the value of a call option.
• C) the value of a call option is negatively related to its exercise price.
• D) the value of a call option is positively related to the volatility of the underlying asset.
• E) the value of a call option is positively related to the price of the underlying stock.

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Definitions:

Privilege

Special rights or advantages available only to a particular person or group of people.

Positive Aspects

Describes the beneficial qualities or positive outcomes of a situation, individual, or concept, highlighting its advantages or valuable effects.

Negative Aspects

Features or characteristics of a situation, phenomenon, or concept that are detrimental, harmful, or undesirable.

Social Construction

The theory that aspects of our reality, including knowledge, are not inherent but are created through social interactions and cultural norms.