The value of a put option is positively related to the:
I.exercise price;
II.time to expiration;
III.volatility of the underlying stock price;
IV.risk-free rate
A)I, II, and III only
B)II, III, and IV only
C)I, II, and IV only
D)IV only

Question

Quizplus · Accepted Answer

The exercise price affects the value of the put option as it represents the price at which the option can be exercised. A lower exercise price increases the value of the put option. The time to expiration also affects the value of the put option as a longer time to expiration allows for more opportunities for the stock price to fall below the exercise price. Volatility of the underlying stock price also affects the value of the put option as higher volatility increases the likelihood of the stock price falling below the exercise price. The risk-free rate does not directly affect the value of the put option.

The Value of a Put Option Is Positively Related to The