Consider Three Put Options at Strikes 40,50,and 60

question 7

Multiple Choice

Consider three put options at strikes 40,50,and 60.The price of the 40-strike option is $4 and the price of the 60-strike option is $8.Which of the following statements is most accurate? (Assume all options have the same maturity. )

• A)The price of the 50-strike put is less than $10.
• B)The price of the 50-strike put is less than $6.
• C)The price of the 50-strike put is greater than $6.
• D)The price of the 50-strike put is greater than $7.

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Definitions:

Current Account

Part of a nation's balance of payments encompassing the trade balance, net primary income, and net secondary income components.

Balance of Payments

A comprehensive summary of a country's economic transactions with the rest of the world over a specific time period, including trade, services, and financial transfers.

Capital Account

A component of a nation’s balance of payments that records all transactions of purchase and sale of assets, like real estate and stocks with other countries.

Financial Account

A component of a country's balance of payments that records transactions of foreign investment and domestic investments abroad.