4. Which of the following statements about the current value of a short European call option on Warwick plc stock, a non-dividend-paying stock, is/are true? (a) The current value of a short European call option is less than or equal to zero. (b) The current value of a short European call option decreases as the volatility of returns on Warwick plc stock increases, holding all else constant. (c) The current value of a short European call option decreases as the price of Warwick plc stock increases, holding all else constant. *

4. Which of the following statements about the current value of a short European call option on Warwick plc stock, a non-dividend-paying stock, is/are true? (a) The current value of a short European call option is less than or equal to zero. (b) The current value of a short European call option decreases as the volatility of returns on Warwick plc stock increases, holding all else constant. (c) The current value of a short European call option decreases as the price of Warwick plc stock increases, holding all else constant. *

Financial Accounting Intro Concepts Meth/Uses

14th Edition

ISBN:9781285595047

Author:Weil

Publisher:Weil

Chapter15: Shareholders’ Equity: Capital Contributions And Distributions

Section: Chapter Questions

Problem 5Q

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2. Which of the following statements about options on Warwick plc stock, a non- dividend-paying stock, is/are true? (a) The current value of a short American call option is minus the current value of the corresponding long European call option with the same strike price and maturity. (b) The current value of a short American put option is minus the current value of the corresponding long European put option with the same strike price and maturity. (c) If the option is sufficiently in-the- money and the risk-free rate is positive, the value of a long European put option is strictly less than the payoff to the put option. (a) only. O (b) only. (c) only (a) and (c) only (a), (b) and (c)
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Which of the following would increase the price of a put option on common stock , all else equal? I. Decrease in stock price II . Decrease in stock price volatility III . Decrease in time to maturity IV . Increase in exercise price II , and IV l and IV I only I III , and IV IV only
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