The value of a call option ________ with the risk-free rate, and the value of a put option ________ with the risk-free rate.
A) increases, increases
B) decreases, decreases
C) increases, decreases
D) decreases, increases

Question

Quizplus · Accepted Answer

The value of a call option increases with the risk-free rate because the present value of the exercise price decreases, making it more attractive to hold a call. Conversely, the value of a put option decreases as the risk-free rate increases because the present value of the exercise price decreases, making it less attractive to hold a put.

The Value of a Call Option ________ with the Risk-Free