Which of the Following Statements Regarding American Puts Is/are True

question 8

Multiple Choice

Which of the following statements regarding American puts is/are true?

• A) An American put can be exercised any time before expiration
• B) An American put is always more valuable than an equivalent European put
• C) Multi-period binomial model can be used to value an American put
• D) All of the above

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Definitions:

Marginal Utilities

The additional satisfaction or utility that a person receives from consuming an additional unit of a good or service.

Optimal Choice

The decision that yields the highest benefit or utility for an individual, considering constraints and available information.

Marginal Rate

In economics, it generally refers to the increase or decrease in the cost or benefit of producing one additional unit of a good or service.

Indifference Curves

Graphical representations in microeconomics to illustrate different combinations of two goods between which a consumer is indifferent.