Which of the Following Statements Is True About the Relationship

question 21

Multiple Choice

Which of the following statements is true about the relationship between the option price and the risk-free rate?

• A)a call price is nearly linear with respect to the risk-free rate
• B)a call price is highly sensitive to the risk-free rate
• C)the risk-free rate affects a call but not a put
• D)the risk-free rate does not affect a call price
• E)none of the above

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Definitions:

Total Cost Curve

A graphical representation that shows the total cost of producing different quantities of output.

Ratio

A mathematical expression that represents the quantitative relationship between two numbers, showing how many times one value contains or is contained by the other.

Output

The total amount of goods or services produced by a firm, industry, or economy in a given period.

Average Fixed Costs

The fixed costs of production divided by the quantity of output produced, decreasing as production increases.