EX3 TakeHome E 37500 12 All else the same the value of a cal

EX3 Take-Home E) $375.00 12. All else the same, the value of a call option decreases A) with increases in the underlying asset price B) with decreases in the exercise price C) with decreases in the risk-free interest rate D) the less out-of-the-money the option becomes E) with increases in the time to expiration $9,250, debt w The Wrangler Co. has expected EBIT $14,000 paying a 9% annual coupon, and an unlevered rate is 39%, what is the value of Wrangler\'s equity? 13.

Solution

The correct answer is (C) i.e all else the same, the value of a call option decreases with decreases in the risk-free interest rate. The other options lead to a rise in the value of a call option.