Using the Black-Scholes model and all other input variables are held constant, the value of a put will decline if the
A) higher the risk of the common stock.
B) lower the riskfree rate.
C) lower the exercise price.
D) lower the price of the stock.

Question

Quizplus · Accepted Answer

According to the Black-Scholes model, the value of a put option is directly related to the exercise price. As the exercise price decreases, the value of the put option decreases. All other input variables being held constant, a lower exercise price will result in a lower value for the put option.

Using the Black-Scholes Model and All Other Input Variables Are