A European Put Option Can Be Exercised

question 11

Multiple Choice

A European put option can be exercised

• A) any time in the future.
• B) only on the expiration date.
• C) if the price of the underlying asset declines below the exercise price.
• D) immediately after dividends are paid.

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Definitions:

Long Run

In economics, a period in which all inputs can be adjusted by firms, allowing for the full impact of decisions to unfold and market to reach equilibrium.

Break-Even Point

The break-even point is the level of production or sales at which total revenues equal total expenses, resulting in no net profit or loss for a business.

Short-Run Supply Curve

A graphical depiction showing the relationship between the price of a good and the quantity supplied over a short period, wherein some inputs are fixed.

Long-Run Supply Curve

A graphical representation showing the relationship between the price of a good and the quantity supplied over a long period, accounting for adjustments in all factors of production.