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. *

Essentials Of Investments
11th Edition
ISBN:9781260013924
Author:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Publisher:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Chapter1: Investments: Background And Issues
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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.
(a)
only.
(b)
only.
(c)
only.
(b) and (c)
only.
(a), (b) and
(c).
*
Transcribed Image Text: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. (a) only. (b) only. (c) only. (b) and (c) only. (a), (b) and (c). *
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