If Radio Shack Offers Several Models of Clock Radios at Each

question 96

True/False

If Radio Shack offers several models of clock radios at each $5 increment between $19.95 and $49.95, it is probably practicing odd-even pricing.

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Definitions:

Exercise Price

The cost at which an option's holder has the right to purchase or sell the asset underlying the option.

Expiration Date

The last day on which an option or derivative contract is valid, after which it either becomes worthless or is automatically settled.

American Put Option

A derivative security that gives the holder the right, but not the obligation, to sell a specified quantity of an underlying asset at a set price within a specified time.

Striking Price

The specified price at which the holder of an option can buy (call option) or sell (put option) the underlying asset.