Q638
An increase in value of option leads to low present value of exercise cost only if it has
A.
low volatility
B.
interest rates are high
AnswerC.
interest rates are low
D.
high volatility
Answer: Option B
Solution
Answer: Option B
Solution:
An increase in value of option leads to low present value of exercise cost only if it has interest rates are high. Because higher interest rates mean higher borrowing costs, people will eventually start spending less. The demand for goods and services will then drop, which will cause inflation to fall.