Investor A bought a call option and Investor B bought a put option.All else equal if the interest rate increases the value of Investor A's position will ______ and the value of Investor B's position will _______.
A) increase; increase
B) increase; decrease
C) decrease; increase
D) decrease; decrease

Question

Quizplus · Accepted Answer

An increase in interest rates will lead to an increase in the value of Investor A's call option as the underlying asset is expected to appreciate in the future. On the other hand, an increase in interest rates will lead to a decrease in the value of Investor B's put option as the underlying asset is expected to depreciate in the future.

Investor a Bought a Call Option and Investor B Bought