Adam Smith is a portfolio manager with Point72 Investments, a U.S.-based asset management firm. Smith is considering using options to enhance portfolio returns and control risk. He asks his junior analyst, Tommy Lee, to help him.  Lee collected and summarize the relationship between a European call option and various factors that might impact the call option value in Table 1. Which of the relationships shown in Table 1 below is incorrect? (Choose the best answer) Table 1 Impact of Increasing the Variables on put option value Variables Impact on put option value Stock price Decrease Strike Price Decrease Maturity Increase Volatility Increase Interest rate Decrease Dividend Increase     Volatility and Stock Price     Risk-free rate and Volatility     Dividend and stock price     Maturity and Strike Price     Stock Price and Interest Rat

Intermediate Financial Management (MindTap Course List)
13th Edition
ISBN:9781337395083
Author:Eugene F. Brigham, Phillip R. Daves
Publisher:Eugene F. Brigham, Phillip R. Daves
Chapter3: Risk And Return: Part Ii
Section: Chapter Questions
Problem 4MC: You have been hired at the investment firm of Bowers Noon. One of its clients doesnt understand the...
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Adam Smith is a portfolio manager with Point72 Investments, a U.S.-based asset management firm. Smith is considering using options to enhance portfolio returns and control risk. He asks his junior analyst, Tommy Lee, to help him.  Lee collected and summarize the relationship between a European call option and various factors that might impact the call option value in Table 1. Which of the relationships shown in Table 1 below is incorrect? (Choose the best answer)

Table 1

Impact of Increasing the Variables on put option value

Variables

Impact on put option value

Stock price

Decrease

Strike Price

Decrease

Maturity

Increase

Volatility

Increase

Interest rate

Decrease

Dividend

Increase

   

Volatility and Stock Price

   

Risk-free rate and Volatility

   

Dividend and stock price

   

Maturity and Strike Price

   

Stock Price and Interest Rate

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