The Current Market Price of a Share of a Stock

question 32

Multiple Choice

The current market price of a share of a stock is $20. If a put option on this stock has a strike price of $18, the put

• A) is out of the money.
• B) is in the money.
• C) sells for a higher price than if the strike price of the put option was $23.
• D) is out of the money and sells for a higher price than if the strike price of the put option was $23.
• E) is in the money and sells for a higher price than if the strike price of the put option was $23.

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Definitions:

Aggregate Demand

The total demand for all goods and services within a particular economy at a given overall price level and in a given time period.

Interest Rate

The percentage at which interest is paid by a borrower for the use of money they borrow from a lender, often expressed as an annual percentage rate (APR).

Multiplier

In macroeconomics, a factor that quantifies how an initial change in spending will affect total economic output.

Crowding-out Effects

The phenomenon where increased government spending leads to a reduction in private sector spending.