An investor is more likely to exercise a put option on a bond after
A) an increase in interest rates.
B) a decrease in interest rates.
C) an increase in the bond's price.
D) an upgrade of the bond's rating by Moody's.
E) tax-free municipals become available.

Question

Quizplus · Accepted Answer

An increase in interest rates typically leads to a decrease in bond prices, making it more advantageous for an investor to exercise a put option to sell the bond at a higher price than the current market value.

An Investor Is More Likely to Exercise a Put Option