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1. Why does a put option's value increase when the strike price rises? a) Compare this situation to an auto insurance policy: what would happen
1. Why does a put option's value increase when the strike price rises? a) Compare this situation to an auto insurance policy: what would happen to the premium if the policy paid off a higher proportion of the cars value, in the event of an accident? b) What does this fact imply about the default probability of a firms outstanding bonds if it issues more, new bonds of equal seniority?
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