Essentials Of Investments
11th Edition
ISBN: 9781260013924
Author: Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Publisher: Mcgraw-hill Education,
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Telstra announces a major expansion into Internet services. This announcement causes the price of Telstra stock to increase, but also causes an increase in the volatility of the stock price. Which of the following correctly identifies the impact of these changes on the price of Telstra call options?
A. The greater uncertainty will cause the price of the call option to increase. The higher price of the stock will cause the price of the call option to decrease.
B. Both changes cause the price of the call option to decrease.
C. Both changes cause the price of the call option to increase.
D.The greater uncertainty will cause the price of the call option to decrease. The higher price of the stock will cause the price of the call option to increase.
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