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the price of a call option tends to be lower when which of the following is higher (all else equal)? multiple choice the expected volatility of the underlying stock

User RbG
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Answer:

The price of a call option tends to be lower when the expected volatility of the underlying stock is lower, all else equal.

User Cutton Eye
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The price of a call option tends to be higher when the expected volatility of the underlying stock is higher (not lower), all else equal. The reason for this is that the value of an option is directly related to the volatility of the underlying asset, as higher volatility increases the likelihood that the option will end up "in the money" (i.e., profitable for the option holder).

When the expected volatility of the underlying stock is higher, the potential for larger price movements is greater, which means that the option has a higher probability of being profitable. As a result, investors are willing to pay more for the option, which leads to a higher price.

User Weatherman
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