All of the following factors affect the price of a stock option except
A) the risk-free rate.
B) the riskiness of the stock.
C) the time to expiration.
D) the expected rate of return on the stock.
E) None of the options are correct.

Question

Quizplus · Accepted Answer

The expected rate of return on the stock does not directly affect the price of a stock option. Option pricing models, such as the Black-Scholes model, consider factors like the risk-free rate, the stock's volatility (riskiness), and the time to expiration, but not the stock's expected rate of return.

All of the Following Factors Affect the Price of a Stock