Which one of the following variables influences the value of call options? I) Level of interest rates
II) Time to expiration of the option
III) Dividend yield of underlying stock
IV) Stock price volatility
A)I and IV only
B)II and III only
C)I, II, and IV only
D)I, II, III, and IV

Question

Quizplus · Accepted Answer

All four variables influence the value of call options. The level of interest rates affects the cost of carrying positions, time to expiration impacts the time value component of an option, dividend yield influences the underlying stock price projections, and stock price volatility affects the option's potential for profit.

Which One of the Following Variables Influences the Value of Call