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4 June, 15:41

A rise in the foreign interest rate will Group of answer choices

raise the value of foreign‑currency call options and lower the value of foreign‑currency put options

raise the value of foreign‑currency put options and lower the value of foreign‑currency call options

raise the value of both foreign‑currency put and call options

reduce the value of both foreign‑currency put and call options

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Answers (1)
  1. 4 June, 15:49
    0
    raise the value of foreign‑currency put options and lower the value of foreign‑currency call options

    Explanation:

    Options are the ability of an investor to buy or sell an asset. A call option is the choice to buy an asset at a particular price on or before a particular date.

    A put option is the choice to sell an asset on or before a particular date.

    As foreign interest rate increases and exchange rate is constant, the value of the foreign currency decreases therefore resulting in a decrease in value of call options.

    This also results in an increase in value of put options
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