low volatility
interest rates are high
interest rates are low
high volatility
✅ The correct answer is B.
An increase in value of option leads to low present value of exercise cost only if it has interest rates are high. Because higher interest rates mean higher borrowing costs, people will eventually start spending less. The demand for goods and services will then drop, which will cause inflation to fall.
An increase in value of option leads to low present value of exercise cost only if it has interest rates are high. Because higher interest rates mean higher borrowing costs, people will eventually start spending less. The demand for goods and services will then drop, which will cause inflation to fall.