Which One of the Following Statements Concerning Option Payoffs Is

question 62

Multiple Choice

Which one of the following statements concerning option payoffs is correct?

• A) The buyer of a call profits when the exercise price exceeds the market price.
• B) The buyer of a call profits when the strike price exceeds the exercise price.
• C) A put will only be exercised if both the seller and the buyer can profit.
• D) Both the buyer and the seller profit when a call is exercised.
• E) The seller of a put incurs a loss when a put is exercised.

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Definitions:

Fair Value Option

The choice given to entities to report certain financial assets and liabilities at their fair value to measure change in their value.

Financial Instrument

An agreement resulting in a financial asset for one party and a financial obligation or equity security for another.

Receivables Recognition Irregularities

Irregularities or anomalies in recognizing receivables that may involve premature or improper revenue recognition, affecting the financial statements' accuracy.

Changes in Receivables

This refers to the variations in the amounts owed to a company by its customers over a specific period.