Why does a put options value increase when the strike price, Ask an Expert

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Why does a put option's value increase when the strike price rises?

a) Compare this situation to an auto insurance policy: what would happen to the premium if the policy paid off a higher proportion of the car’s value, in the event of an accident?

b) What does this fact imply about the default probability of a firm’s outstanding bonds if it issues more, new bonds of equal seniority?

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Financial Management, Finance

Category:- Financial Management
Reference No.:- M92744042

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