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Would a company exercise the call option when interest rate increases or decreases?

Would a company exercise the call option when interest rate increases or decreases?

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Answer #1

When the interest rate increases stock prices in the market decreases. Company holding call option will excercise it only when the stock prices in the market is high. Therefore when the interest rate increases, stock prices will fall and the company would not excercise the call option.

When the interest rate decreases stock prices in the market will increase and therefore the company would excercise the call option.

Conclusion: Company would excercise the call option when interest rate decreases.

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