Which of the following events is likely to decrease the value of call options on the common stock of GCC Company?
A) An increase in GCC's stock price.
B) An increase in the exercise price of the option.
C) An increase in the amount of time until the option expires.
D) An increase in the risk-free rate.
E) GCC's stock price becomes more risky (higher variance).

Question

Quizplus · Accepted Answer

An increase in the exercise price of the option makes it less likely that the option will be in the money before expiration, thus decreasing its value.

Which of the Following Events Is Likely to Decrease the Value