According to the Black/Scholes option valuation
Model, 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

The value of a call option decreases if the variability (volatility) of the stock's return declines and the interest rate decreases, as both factors contribute to a lower expected future stock price movement and reduced time value.

According to the Black/Scholes Option Valuation