Increasing which of the following will have a negative impact on the price of a call option?
A) The stock price.
B) The time to maturity.
C) The risk-free rate of interest.
D) The dividend yield.
E) The volatility of the underlying stock.

Question

Quizplus · Accepted Answer

An increase in the dividend yield will decrease the price of a call option, as it will decrease the present value of potential future dividends and therefore decrease the price investors are willing to pay for the option. All other factors listed have a positive relationship with the price of a call option.

Increasing Which of the Following Will Have a Negative Impact