Response to the following questions:
1. For which type of option (put or call) does the price of the option vary inversely with the:
a. exercise price?
b. value of the underlying asset?
2. If the expected volatility of the underlying asset's value increases, what would happen to the price of
a. a call option?
b. a put option?
3. If interest rates in the market decline below the coupon rate on a callable bond that is currently callable, why would an investor say that the embedded call option is "in the money"?