As the Risk Free Rate of Return Increases, the Value

question 22

Multiple Choice

As the risk free rate of return increases, the value of call options ________ and the value of put options ________.

• A) decreases, increases
• B) increases, increases
• C) decreases, decreases
• D) increases, decreases

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Definitions:

Liabilities

Financial obligations or debts that a company or individual is responsible for repaying.

Accruals

The accounting principle that revenue and expenses are recorded when they are incurred, regardless of when cash is exchanged.

Balance Sheet

A financial statement showing a company's assets, liabilities, and shareholders' equity at a specific point in time, reflecting the financial condition of the company.

Accounts Receivable

Money owed to a company by its customers for products or services that have been delivered but not yet paid for.