Which of these will increase the value of a call option?I. An increase in the market value of the underlying assetII. An increase in the option's exercise (or strike) priceIII. A decrease in the market value of the underlying assetIV. An increase in the volatility of the underlying asset's returnsA) I and Il onlyв) I onlyC) I and IV onlyD) Il and III only

Call Option: Options on stocks, bonds, commodities, and other assets or instruments are financial…

Which of these will increase the value of a call option? I. An increase in the market value of the underlying asset II. An increase in the option's exercise (or strike) price II. A decrease in the market value of the underlying asset IV. An increase in the volatility of the underlying asset's returns A) I and Il only B) Il only C) I and IV only D) Il and III only

Which of these will increase the value of a call option? I. An increase in the market value of the underlying asset II. An increase in the option's exercise (or strike) price II. A decrease in the market value of the underlying asset IV. An increase in the volatility of the underlying asset's returns A) I and Il only B) Il only C) I and IV only D) Il and III only

Essentials Of Investments

11th Edition

ISBN:9781260013924

Author:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.

Publisher:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.

Chapter1: Investments: Background And Issues

Section: Chapter Questions

Problem 1PS

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which one is correct please confirm? Q2: "An increase in the volatility of the underlying asset, all other things held constant, will ______ the option premium." increase decrease increase or decrease Not enough information is given.
Which of the following statements is true about call options? A.The holder of the option profits when the price of the underlying asset increases. B.It gives to the buyer of the option the right to sell a financial instrument within a specific time period, at a specified price. C.The holder of the option will exercise the option only if the price of the underlying asset is smaller than the strike price. D.The holder of the option receives a premium for writing the option.
Which of the following are NOT the determinants of option prices? Select one:i. Average returnii. Time to maturityiii. Underlying priceiv. Interest ratesv. Exercise pricevi. Volatility
When the price of the underlying financial instrument exceeds the exercise [strike] price of a call option, the option is said to be: A. ripe for a put.B. out of the running.C. in the money.D. dead on the money.
4c) State the effect, if any, of each of the following three variables on the value of a call option. (No calculations required.) i. An increase in the short-term interest rate. ii. An increase in stock price volatility. iii. A decrease in time to option expiration.
IT IS NOT DELTA Option _______ is a percentage change in the value of the option per 1% change in the value of the underlying security. b. Rho c. Elasticity d. Theta
Which of the following best describes the intrinsic value of an option? The Black-Scholes-Merton price of the option The value it would have if the owner had to exercise it immediately or not at all The amount paid for the option The lower bound for the option’s price
Which of the following inputs is not required to price option using the Black‐Scholes model? a) the asset price b) the time to maturity c) the asset’s risk premium d) the risk‐free rate of interest
The pay off from an option depends on the market price of the underlying asset a) a put holder benefits from increase in the price b)a put writer benefits from an increase in the price c) a call holder benefits from decrease in price d) none of these are true
Below is a chart with profit/loss on the vertical axis, and the $/£ exchange rate on the horizontal axis. The solid line shows the profit/loss schedule for a: Question 8 options: put option in isolation (e.g. used for speculating that the pound will depreciate) None of the above covered call option (a call option is used as a hedge) covered put option (a put option is used as a hedge)
Equating theoretical option price and the market option price, we can solve for implied indicators. Which is appropriate to be used as a quote for option? a) Implied strike price b) Implied volatility c) Implied risk-free rate d) None of the above
fill the missing words: a. For ( ) options, when the spot price is ( ) than(or equal to)the exercise price, then profit/loss equals the premium. b. For ( ) options, when the spot price is ( ) than (or equal to) the exercise price, then the profit/loss will be equal to the option premium.

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