- 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
CFA Practice Question
Which of the following factors imply that a European call on a stock is worth less?
B. Higher interest rate
C. Larger dividends than expected
A. More time to expiration
B. Higher interest rate
C. Larger dividends than expected
Correct Answer: C
Payments of dividends and interest reduce the value of the underlying. The dividends do not flow to the option holder.
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