All other things held constant,premiums on put options will increase when the
A) exercise price increases.
B) volatility of the underlying asset falls.
C) term to maturity increases.
D) A and C are both true.

Question

Quizplus · Accepted Answer

The premiums on put options increase when the exercise price increases because the option becomes more valuable as it allows the holder to sell the underlying asset at a higher price. Additionally, premiums increase as the term to maturity increases because there is a greater chance of the option ending in the money due to the longer time frame for the underlying asset's price to move. Volatility increase (not decrease as in option B) also raises premiums, but this is not part of the correct options provided.

All Other Things Held Constant,premiums on Put Options Will Increase