The Maximum Option Payoff From

question 105

Multiple Choice

The maximum option payoff from:

• A)writing a put is $0.
• B)buying a put is $0.
• C)writing a call is an unlimited profit.
• D)buying a call is the strike price.
• E)writing a call is the stock price.

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Definitions:

Compounded Semi-annually

The process of adding interest to the principal sum of a loan or deposit, where the interest is added twice a year.

Perpetuity

A type of annuity that continues indefinitely, making regular payments for an infinite amount of time.

Compounded Monthly

The method of calculating interest where the earned interest is added to the principal each month, leading to interest on interest.

Perpetuity

Perpetuity refers to a type of annuity that pays a consistent amount of income to an individual indefinitely.