- CFA Exams
- CFA Level I Exam
- Study Session 16. Derivatives
- Reading 49. Basics of Derivative Pricing and Valuation
- Subject 8. Factors that Affect the Value of an Option

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**CFA Practice Question**

Which factor is DIRECTLY related to the value of a European put option?

B. Risk-free rate of interest

C. Cost of carry

A. Volatility of the underlying

B. Risk-free rate of interest

C. Cost of carry

Correct Answer: A

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**User Contributed Comments**
2

User |
Comment |
---|---|

Ricey |
Shouldn't it be B? higher risk-free rate results in lower put option value. |

breh |
@Ricey: A is just more directly related. |