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101 Concepts for the Level I Exam

Concept 93: Factors that Determine the Value of an Option

Increase in Value of call option will Value of put option will
value of the underlying Increase Decrease
exercise price Decrease Increase
risk-free rate Increase Decrease
time to expiration Increase Increase (exception: a few European puts)
volatility of the underlying Increase Increase
costs incurred while holding the underlying Increase Decrease
benefits received while holding the underlying Decrease Increase

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