When a Six-Month Option Is Purchased

question 8

Multiple Choice

When a six-month option is purchased

• A) The price must be paid in full
• B) Up to 25% of the option price can be borrowed using a margin account
• C) Up to 50% of the option price can be borrowed using a margin account
• D) Up to 75% of the option price can be borrowed using a margin account

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Definitions:

Potential Entrant

Refers to a business or company that is not currently in a market but has the capability and interest to enter the market if certain conditions are met.

Dominant Strategy

A strategy in game theory that yields the best outcome for a player regardless of what strategies other players choose.

Nash Equilibria

A situation in a non-cooperative game where no player can benefit by changing strategies, assuming the other players also don't change their strategies.

Maximin Strategy

A decision rule in game theory that aims to maximize the minimum gain possible from a set of strategies.