The price of a call option will be higher,

Question

Quizplus · Accepted Answer

The higher the volatility, the greater the likelihood that the stock price will rise above the strike price, making the call option more valuable. The other statements are false: A is incorrect because as the strike price increases, the option becomes less valuable; C is incorrect because longer expiration periods give the stock more time to rise in value and the option more time to be exercised, making it more valuable; and D is incorrect because lower interest rates do not directly affect the value of call options. The greater the volatility of the stock returns, the higher the price of a call option will be as there is a higher chance of the underlying asset having a large positive return, increasing the option value.

The Price of a Call Option Will Be Higher