The value of a call option is negatively related to the:
I.exercise price;
II.risk-free rate;
III.time to expiration
A)I only
B)II only
C)III only
D)II and III only

Question

Quizplus · Accepted Answer

The value of a call option is negatively related to the exercise price (I) because as the exercise price increases, it becomes less likely that the option will be in the money at expiration, thus decreasing its value. The value of a call option is positively related to both the risk-free rate (II) and the time to expiration (III), contrary to the options listed in II and III.

The Value of a Call Option Is Negatively Related to The