The Primary Difference Between an American Option and a European

question 311

Multiple Choice

The primary difference between an American option and a European option is the:

• A) Size of the option contract.
• B) The length of the option contract.
• C) Time at which the option can be exercised.
• D) The number of shares of the underlying asset.
• E) The size of the option premium.

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Definitions:

Marginal Cost

The cost of producing one additional unit of a product.

Additional Unit

The next unit of production or consumption, considered in analysis of changes in benefit or cost from increasing quantity.

Fixed Cost

Business expenses that remain constant regardless of the level of production or sales activity, such as rent or salaries.

Lease Payments

Regular payments made by a lessee to a lessor for the use of a property, vehicle, or equipment.