When a Stock Index Option Is Exercised, the Cash Payment

question 63

Multiple Choice

When a stock index option is exercised, the cash payment is equal to a specified dollar amount multiplied by

• A)the index level.
• B)the exercise price.
• C)the difference between the index level and the exercise price.
• D)the sum of the index level and the exercise price.

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Definitions:

Financial Gain

An increase in financial wealth, often resulting from investments or the operations of a business.

Sufficient Willpower

The necessary amount of determination and self-control required to achieve a goal or follow through with a decision.

Behavioral Economics

A field of economic study that examines how psychological, cognitive, emotional, cultural, and social factors affect economic decisions of individuals and institutions.

Temptation

The desire to engage in short-term urges for enjoyment, often at the expense of long-term goals.