Which of the Following Is Correct for the Owner of a September

question 101

Multiple Choice

Which of the following is correct for the owner of a September put,valued at $20,on CBA Corp.with a strike price of $80? CBA currently trades at $67.

• A) The option will continue to gain value until its September expiration.
• B) The owner profits $13 per share by exercising now.
• C) Further decreases in CBA stock price will be translated directly into additional option value.
• D) $20 is the maximum value for this option.

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Definitions:

Consumption Spending

The total money spent by households in an economy on goods and services.

Marginal Propensity

The fraction of an additional unit of income that is spent on consumption rather than being saved.

Consumption Function

The relationship in the economy between consumption and income, other things constant.