Please mark the only incorrect statement about the determinants of the value of an American put option: a

Finance Dec 10, 2020

Please mark the only incorrect statement about the determinants of the value of an American put option: a. the put premium P will be lower if the time to expiration is shorter b. the lower the stock price the higher the put's premium P Ο Ο Ο C. the higher the volatility of the stock price the higher the premium P d. changes in interest rate have no effect on the put's premium P

Expert Solution

Option D is incorrect Since interest will have impact on premium directly.

All other statement are correct since time has direct relationship , stock price has inverse relationship and volatility has direct relationship wit premium

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