1.3 Which of the following statements are correct concerning option values?

I. The value of a call increases as the price of the underlying stock increases.

II. The value of a call decreases as the exercise price increases.

III. The value of a put increases as the price of the underlying stock increases.

IV. The value of a put decreases as the exercise price increases.

2. Peter Inc. has an asset with a Book Value of $700. It is expected to generate cash flows of $180 per year for the next four years. If the discount rate is 6%, then what is the Present Value of the Asset's Discounted Cash Flows?

Is the Asset in the previous problem considered impaired?

A. Yes, its Book Value is higher than its discounted Cash Flows

B. Yes, its Book Value is higher than its undiscounted Cash Flows

C. No, its Book Value is less than its discounted Cash Flows

D. No, its Book Value is less than its undiscounted Cash Flows