An Investor Purchased a Share of Stock for $42 and at the Same

question 20

Multiple Choice

An investor purchased a share of stock for $42 and at the same time paid $2 to purchase a put option on the stock with an exercise price of $40.What is her profit if the stock is worth $30 at expiration?

• A) $6
• B) −$6
• C) −$4
• D) $4

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Definitions:

Memories

The mental storage of information, experiences, and learning, which can be recalled to inform and guide current behavior and thinking.

Fechner's Law

A principle in psychophysics that quantifies the relationship between the intensity of a physical stimulus and the intensity of the sensation it produces, suggesting a logarithmic relationship.

Weber's Law

A principle in psychology that proposes the smallest change in a stimulus that can be detected is proportional to the intensity of the original stimulus.

Sensation Strength

The intensity level at which a stimulus is perceived, influenced by physical properties and individual sensitivity.