The Following Depicts the Value of a Call Option

question 45

Multiple Choice

The following depicts the value of a call option.Match the descriptions in the Legend with the correct numbers on the graph.

Legend:
Time Value
Underlying asset price
Strike price
Intrinsic value of a call
Payoff/profit/option value

• A)1, 2, 3, 4, 5 respectively
• B)5, 3, 2, 4, 1 respectively
• C)4, 1, 2, 5, 3 respectively
• D)5, 1, 2, 4, 3 respectively

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Definitions:

Earplugs

Devices inserted in the ear canal to protect the ears from loud noises, water, foreign bodies, or excessive wind.

Utility Function

A mathematical representation that ranks an individual's preferences over a set of goods or outcomes.

Equivalent Variation

A measure in economics that calculates the change in income required to reach the utility level before a price change, keeping the new prices constant.

Earrings

Are jewelry or ornaments worn attached to the earlobes or through holes pierced in the ears, available in various designs and materials.