The higher the exercise price:
A) the higher the call price.
B) The lower the call price.
C) Has no effect on call price.
D) The higher the stock price.
E) The lower the stock price.

Question

Quizplus · Accepted Answer

The exercise price, also known as the strike price, represents the price at which the option can be exercised. When the exercise price is higher, there is less likelihood that the stock price will reach that level and therefore the option becomes less valuable. As a result, the call price decreases.

The Higher the Exercise Price