CIMA F3 Exam With Confidence Using Practice Dumps

The value of a call option increases when:

The underlying share price increases

The strike price decreases

The time to expiry increases

Volatility increases

Risk-free rate increases

Looking at the options:

A. Increase in strike price → reduces call value

B. Decrease in volatility → reduces call value

C. Increase in time to expiry → increases call value ✅

D. Decrease in share price → reduces call value

Answer: C. An increase in the time to expiry.

Vertical integration means moving up or down the value chain (suppliers or distributors), not acquiring similar producers (horizontal integration) or unrelated accessory businesses. Buying a listed international logistics firm brings distribution in-house and so is the clearest example of vertical integration that could improve margins.

IFRS 7 requires detailed disclosures about financial instruments and risk management, including currency risk, sensitivity analysis, and how those risks are managed. When these are published for the first time, investors may learn new information about:

The extent of US$ exposure (40% export sales), and

The quality of risk management (hedging, matching, etc.).

Efficient market theory (covered in F3) says prices adjust to new, relevant information. That new information could make investors more confident (if risks are well managed) or more concerned (if risks are high and poorly managed). So the share price could either increase or decrease, depending on the market’s reaction.

That matches option D.

Options A and C assume a one-way direction (always up or always down), which is unrealistic. B is wrong because segmental analysis does not normally give the same detailed, risk-focused disclosure as IFRS 7.