If the Adoption of a New Product Will Reduce the Sales

question 30

Multiple Choice

If the adoption of a new product will reduce the sales of an existing product,then the:

• A) new product should not be undertaken.
• B) old product should be abandoned.
• C) incremental benefits of the new product may be overestimated.
• D) incremental benefits of the new product may be underestimated.

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Definitions:

Put Option Contracts

Financial contracts giving the owner the right, but not the obligation, to sell a specified amount of an underlying asset at a set price within a specified time.

Exercise Price

Also known as the strike price, it’s the specified price at which an option contract can be exercised, determining the price at which the underlying security can be bought or sold.

Option Price

The premium that must be paid by the buyer to the seller to acquire the rights that the option confers, without the obligation to buy (call) or sell (put) the underlying asset.