The Difference Between an American Call Option and a European

question 23

Multiple Choice

The difference between an American call option and a European call option is:

• A) the European call has a final exercise date.
• B) the American call trades only on domestic stocks.
• C) the European call can be exercised only on one day.
• D) the American call generates profits regardless of which direction the stock moves.

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Definitions:

Mead

A drink made by the fermentation of honey and water, often enhanced with the addition of fruits, spices, grains, or hops to create an alcoholic beverage.

Price

The financial expenditure expected, essential, or relinquished in payment for something.

Indirect Utility Function

A concept in economics that represents the maximum utility a consumer can achieve with a given income and set prices for goods and services.

Income

Cash inflow, customarily obtained at regular periods, as compensation for work or from investment outcomes.