In the Black-Scholes option pricing model,an increase in the risk free rate (RFR)will cause
A) An increase in call value and an increase in put value
B) An increase in call value and a decrease in put value
C) A decrease in call value and an increase in put value
D) A decrease in call value and a decrease in put value
E) An increase in call value and an increase or decrease in put value

Question

Quizplus · Accepted Answer

An increase in the risk-free rate increases the present value of the exercise price, which increases call option values and decreases put option values.

In the Black-Scholes Option Pricing Model,an Increase in the Risk