Chapter 03 · Section 3.1

Exercise price increase

Now the same question for the exercise price. A higher exercise price means that:

a) the put premium is higher.
b) the call premium is higher.
c) the put premium is lower.
d) the call premium is lower.
• e) b and c
  No. This is the wrong way round. The call, or the right to buy at the a specifed exercise price, is worth less the higher this exercise price. For the put it is the opposite.
  f) a and d

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