Which of the Following Is an Example of a Call

question 44

Multiple Choice

Which of the following is an example of a call option which is out of the money?

• A) The option to sell at $11, the stock is worth $12.
• B) The option to buy at $13, the stock is worth $12.
• C) The option to buy at $12, the stock is worth $12.
• D) The option to sell at $13, the stock is worth $12.
• E) The option to buy at $11, the stock is worth $12.

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Definitions:

Probability

A measure quantifying the likelihood of certain events to occur within a given set.

Prior Probabilities

Probabilities that are assigned to events before any empirical data is taken into account, often based on theoretical considerations or past experience.

Multiplication Rule

A principle in probability theory used to find the probability of two independent events occurring simultaneously.

Posterior Probabilities

The revised probabilities of events or hypotheses after taking into account new evidence or information.