Reading 70: Option Markets and Contracts- LOSm～ Q1-3 decrease, following, increase, change, interest

yanghon

 

LOS m: Indicate the directional effect of an interest rate change or volatility change on an option's price.

Q1. For stock options, which of the following will least likely increase put option values and decrease call option values?

A)   A decrease in the riskless rate of interest.

B)   An increase in the exercise price.

C)   An increase in the riskless rate of interest.

 

Q2. A decrease in the riskless rate of interest, other things equal, will:

A)   decrease call option values and decrease put option values.

B)   decrease call option values and increase put option values.

C)   increase call option values and decrease put option values.

 

Q3. An increase in the riskless rate of interest, other things equal, will:

A)   decrease call option values and increase put option values.

B)   decrease call option values and decrease put option values

C)   increase call option values and decrease put option values.

 

yanghon

LOS m: Indicate the directional effect of an interest rate change or volatility change on an option's price. fficeffice" />

Q1. For stock options, which of the following will least likely increase put option values and decrease call option values?

A)   A decrease in the riskless rate of interest.

B)   An increase in the exercise price.

C)   An increase in the riskless rate of interest.

Correct answer is C)

An increase in the riskless rate of interest will decrease put option values and increase call option values.

 

Q2. A decrease in the riskless rate of interest, other things equal, will:

A)   decrease call option values and decrease put option values.

B)   decrease call option values and increase put option values.

C)   increase call option values and decrease put option values.

Correct answer is B)

A decrease in the risk-free rate of interest will decrease call option values and increase put option values.

 

Q3. An increase in the riskless rate of interest, other things equal, will:

A)   decrease call option values and increase put option values.

B)   decrease call option values and decrease put option values

C)   increase call option values and decrease put option values.

Correct answer is C)

An increase in the risk-free rate of interest will increase call option values and decrease put option values.

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d

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