An Option That Gives the Holder the Right to Buy

question 7

Multiple Choice

An option that gives the holder the right to buy a stock at a specified price at some time in the future is called a(n)

• A) Call option.
• B) Put option.
• C) Out-of-the-money option.
• D) Naked option.
• E) Covered option.

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Definitions:

Fixed Costs

Business expenses that remain constant regardless of the level of production or sales.

Marginal Cost

The change in the total expense associated with the production of an extra unit of a product, whether it be an increase or decrease.

Average Total Cost

The total cost of production divided by the number of goods produced, representing the average cost per unit of output.

Average Total Cost

The total cost of production (fixed plus variable costs) divided by the number of units produced, representing the per-unit production cost.