According to the Black/Scholes option valuationmodel, a call option's value decreases if
A) interest rates increase as the option approaches expiration
B) the variability of the stock's return declines and the interest rate decreases
C) an increase in the price of the stock results in a two for one stock split
D the option is exercised

Question

Quizplus · Accepted Answer

According to the Black/Scholes model, a call option's value is positively related to both the variability of the stock's return and the interest rate. Therefore, if the variability of the stock's return declines and/or the interest rate decreases, the call option's value will decrease as well.

According to the Black/Scholes Option Valuationmodel, a Call Option's Value