All else the same, the value of an American call option decreases __________________.
A) with increases in the underlying asset price
B) with decreases in the exercise price
C) with decreases in the risk-free interest rate
D) the less out-of-the-money the option becomes
E) with increases in the time to expiration

Question

Quizplus · Accepted Answer

The value of an American call option decreases with decreases in the risk-free interest rate because lower interest rates reduce the cost of carrying a position in the underlying asset.

All Else the Same, the Value of an American Call