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Option Value

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There are five factors that determine the value of an American call option. They are the price of the underlying asset, the strike price of the option, the time to expiration of the option, the volatility of the underlying asset and the interest rate. Explain how a change in each factor affects the option's value.

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Solution Summary

The solution explains how a change in each factor affects the option's value.

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Price of Underlying Asset: As the price of underlying asset increases, the value of the call option increases.

Strike Price of the ...

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