You Know That a Call Will Finish In-The-Money

question 15

Multiple Choice

You know that a call will finish in-the-money.Based on that single piece of information,you also know which one of the following?

• A) The stock price will equal the strike price at expiration.
• B) The risk-free rate is zero percent.
• C) A put on the same underlying asset with the same strike and expiration will finish out-of-the-money.
• D) The strike price will exceed the stock price at expiration.
• E) The price of the call is equal to the price of the put.

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Definitions:

Break-Even

The point at which total revenues equal total costs, resulting in neither profit nor loss.

Break-Even Point

The level of production or sales at which total revenues equal total expenses, resulting in neither profit nor loss.

Profit And Loss Statement

A financial statement that summarizes the revenues, costs, and expenses incurred during a specified period, usually a fiscal quarter or year.

Cost Volume Profit Analysis

A managerial accounting technique used to analyze how changes in cost and volume affect a company's operating income and net income.