Problem

How does the price of a call option respond to the following changes, other things equal?...

How does the price of a call option respond to the following changes, other things equal? Does the call price go up or down?

a. Stock price increases.


b. Exercise price is increased.


c. Risk-free rate increases.


d. Expiration date of the option is extended.


e. Volatility of the stock price falls.


f. Time passes, so the option’s expiration date comes closer.

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Solutions For Problems in Chapter 20