The Price of a Stock Is $64

question 2

Multiple Choice

The price of a stock is $64.A trader buys 1 put option contract on the stock with a strike price of $60 when the option price is $10.When does the trader make a profit?

• A) When the stock price is below $60
• B) When the stock price is below $64
• C) When the stock price is below $54
• D) When the stock price is below $50

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Definitions:

Price

The expenditure needed to secure a product, service, or piece of property.

Price-discriminating Monopolist

A monopolist that sells the same product at different prices to different groups of consumers, usually to maximize profits by capturing consumer surplus.

Market

A place or mechanism through which buyers and sellers interact to trade goods, services, or assets, facilitating the determination of prices and the exchange of ownership.

Price Elasticity

An indicator of the sensitivity of consumer demand for a product to variations in its price, reflecting how significantly the amount of the product consumers want to buy alters with price adjustments.