According to the Black and Scholes option pricing model,which of the following will lead to an increase in the value of a call option?

Question

Quizplus · Accepted Answer

According to the Black and Scholes model, an increase in the risk-free rate will increase the value of a call option. This is because a higher risk-free rate implies a higher opportunity cost for holding the underlying asset, which increases the value of the call option. Option A is incorrect because a decrease in the price of the underlying asset will decrease the value of a call option. Option C is incorrect because a decrease in the time to expiration will also decrease the value of a call option, all else being equal. Hence, the correct answer is B.

According to the Black and Scholes Option Pricing Model,which of the Following