According to the Black-Scholes option pricing model, there is an inverse relationship between the value of a call and
A) the risk-free interest rate
B) time remaining before expiration
C) the risk of the underlying stock
D) the exercise price of the call

Question

Quizplus · Accepted Answer

The Black-Scholes model shows that as the exercise price of the call option increases, all else being equal, the value of the call option decreases. This is because the option becomes less likely to finish in the money (i.e., with the stock price above the exercise price).

According to the Black-Scholes Option Pricing Model, There Is an Inverse