Which of the following is true for a call option on a stock worth $50
A. As a stock's expected return increases the price of the option increases
B. As a stock's expected return increases the price of the option decreases
C. As a stock's expected return increases the price of the option might increase or decrease
D. As a stock's expected return increases the price of the option on the stock stays the same
D
The option price when expressed in terms of the underlying stock price is independent of the return on the stock. To put this anotherway, everything relevant about the expected return is incorporated in the stock price.
You might also like to view...
The value of a property purchased for investment purposes is usually:
A: Based on the capitalization of future net income; B: Determined by a gross multiplier factor; C: Proportional to the structural soundness of the building; D: Inversely proportional to the remaining economic life of the building.
When an external party invites a firm to bid on a contract, and includes strict guidelines in the request, what has been generated?
A) Sales proposal B) Internal proposal C) Request for proposal D) Unsolicited proposal E) Investment proposal