1. Consider a European put option with strike price K and expiration date T. The put's present value at time t(t,0).

Group of answer choices

True

False

Question 22 pts

A rise in the risk-free rate results in a decrease in the expected payoff of a European call, other things being equal.

Group of answer choices

True

False

Question 32 pts

Consider two European call options on the same underlying stock. Call A has a strike price of $100 and will expire in two years. Call B has a strike price of $90 and will expire in three years. Then, the price of call B should always be higher than the price of call A.

Group of answer choices

True

False

Question 42 pts

In the risk-neutral valuation, we penalize risk by changing the probability of an increase/decrease in stock price.

Group of answer choices

True

False

Question 52 pts

The put-call parity holds only when future stock price follows a random walk.

Group of answer choices

True

False