The value of an interest rate call option
A) is based on the market price of U.S. Treasury securities.
B) increases when the yield on the underlying Treasury security rises.
C) decreases when the price of U.S. Treasuries decreases.
D) varies directly with the price of the underlying corporate bond.

Question

Quizplus · Accepted Answer

The value of an interest rate call option increases when the yield on the underlying Treasury security rises because the option becomes more valuable as the potential for higher interest rates increases.

The Value of an Interest Rate Call Option