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If the Market Is in Equilibrium, Then an Option Must

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If the market is in equilibrium, then an option must sell at a price that is exactly equal to the difference between the stock's current price and the option's strike price.

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Definitions:

Income Statement

A financial statement that shows a company's revenues and expenses over a specific period, illustrating how the revenues are transformed into net income or loss.

Net Income

The total earnings of a company after all expenses and taxes have been subtracted from total revenue.

Bank Reconciliation

The process of matching the balances in an entity’s accounting records for a cash account to the corresponding information on a bank statement.

Corrected Cash Balance

An adjustment made to a company's book balance of cash to reflect accurate amounts after reconciliation.

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