BLW Corporation is considering the terms to be set on the options it plans to issue to its executives. Which of the following actions would decrease the value of the options, other things held constant?
A. The exercise price of the option is increased.
B. The life of the option is increased, i.e., the time until it expires is lengthened.
C. The Federal Reserve takes actions that increase the risk-free rate.
D. BLW's stock price becomes more risky (higher variance).
E. BLW's stock price suddenly increases.
Answer: A
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