Use the Following to Answer Questions

question 6

Multiple Choice

Use the following to answer questions:
Figure: Oil
-(Figure: Oil) Compared with producing the 20 millionth barrel of oil, the cost of producing the 40 millionth barrel of oil is:

• A) $40 lower.
• B) $40 higher.
• C) approximately the same.
• D) $80 higher.

---

Definitions:

Underlying Stock

Underlying stock refers to the stock upon which a derivative contract, such as an option or futures contract, is based.

Black Scholes Model

A mathematical model used for pricing European call and put options, evaluating the options' theoretical value based on several factors including time, price, volatility, and the risk-free interest rate.

Exercise Price

The price at which the holder of an option can buy (for a call option) or sell (for a put option) the underlying asset.

Standard Deviation

A measure of the dispersion or variation in a set of values, indicating how much the numbers in the set deviate from the mean (average).