Which of the following will decrease the value of a call option?
I.a decrease in the exercise price
II.a decrease in the value of the underlying security
III.an increase in the risk-free rate
IV.an increase in the time to expiration

Question

Quizplus · Accepted Answer

II onlyA decrease in the value of the underlying security decreases the value of a call option because the option becomes less likely to be in-the-money (profitable to exercise). Decreases in the exercise price, increases in the risk-free rate, and increases in the time to expiration generally increase the value of a call option, not decrease it.

Which of the Following Will Decrease the Value of a Call