Which of the following features increase(s) the value of a call option?
A) A high interest rate
B) A long time to maturity
C) A higher volatility of the underlying stock price
D) All of the above

Question

Quizplus · Accepted Answer

All of the above features increase the value of a call option. 
A high interest rate increases the cost of borrowing and hence the cost of buying the underlying stock, which in turn increases the call option price. 
A long time to maturity gives the stock price more time to rise above the strike price, which increases the probability of the call option being exercised, hence increasing its price. 
A higher volatility of the underlying stock price increases the probability of the stock rising above the strike price, hence increasing the price of the call option.

Which of the Following Features Increase(s) the Value of a Call