CFA Practice Question

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CFA Practice Question

As the carry benefits rise, it becomes ______ likely that the call option will expire out of the money.

A. more
B. less
C. The likelihood will remain the same
Correct Answer: A

N(d2) is the probability that a call option will expire in the money. The higher the carry benefits, the lower the value of N(d2); the call option becomes more likely to be out of the money.

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