Which of the following events are likely to increase the market value of a call option on a common stock. Explain.
a) An increase in the stock's price.
b) An increase in the volatility of the stock price.
c) An increase in the risk-free rate.
d)A decrease in the time until the option expires.© BrainMass Inc. brainmass.com June 3, 2020, 9:47 pm ad1c9bdddf
Please find my response below.
a) The greater the stock price, the more is the value of the call option. Recall from the put-call parity equation:
Based on the above formula, more the value of S (Stock ...
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