Midterm, MGMT 41150, 2022 14. Which of the following statement is incorrect? A. The value of call options increases as volatility increases B. A higher interest rate usually leads to an increase in the value of put options C. A longer maturity leads to a higher value for American call options D. Dividend distribution leads to an increase in the value of put options 15. Two call options (C1 and C2) are written on the same stock. The spot price is $100. C1 has a strike price of $108, a maturity of six months, and a price of $5. C2 has a strike price of $90, a maturity of one month, and a price of $5. Between C1 and C2, which one has a higher margin requirement? A. C1 B. C2 C. Undetermined D. C1 and C2 are equal 16. Hedge fund Melvin Capital experienced large loss during the recent GameStop fiasco. Suppose Melvin short 1 million shares of GameStop shock on January 25th and plans to unwind its positions on February 8th. GameStop's share price was at its peak on February 20, at which point Melvin failed to maintain margin and declared bankruptcy. Today (February 6th) GameStop's share price dropped from its peak by 80%. Which one of the following is not what Melvin could have done to prevent bankruptcy? A. Hoard extra cash to maintain margin B. Start buying shares of GameStop during the January 25 - February 20d run-up C. Write long-term calls on GameStop shares at the beginning (i.e., January 25th) D. Write short-term puts on GameStop shares at the beginning (i.e., January 25"h)