All else held constant,the value of a call decreases when the:
A)time to expiration increases.
B)risk-free rate of return increases.
C)stock price increases.
D)exercise price increases.
E)volatility of the price of the underlying stock increases.

Question

Quizplus · Accepted Answer

When the exercise price increases, it becomes less likely that the option will be exercised, which decreases the value of the call. All other factors held constant, an increase in any of the other variables would increase the value of the call, making options A, B, C, and E incorrect.

All Else Held Constant,the Value of a Call Decreases When