Question: 4. If volatility increases, then will the option premium increase or decrease? (1 mark) A. It depends on the option type call or put. B.

4. If volatility increases, then will the option premium increase or

4. If volatility increases, then will the option premium increase or decrease? (1 mark) A. It depends on the option type call or put. B. Option premium will increase, because the greater the volatility, the greater the time value of the option. C. Decrease. Because greater volatility, greater risk, as investors are risk averse, they will value the option less. D. None of the above

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