Suppose That the Salary Range for Recent College Graduates with a Bachelor's

question 97

Multiple Choice

Suppose that the salary range for recent college graduates with a bachelor's degree in economics is $30,000 to $50,000,with 25% of jobs offering $30,000 per year,50% offering $40,000 per year and 25% offering $50,000 per year and that in all other respects,the jobs are equally satisfying.Assume that in this market,a job offer remains open for only a short time so that continuing to search requires an applicant to reject any current job offer.
Who is most likely to have a job that pays $50,000?

• A)Risk-averse graduates.
• B)Graduates who don't mind taking risks.
• C)Risk-neutral graduates.
• D)Graduates who are either risk-neutral or risk-averse.

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Definitions:

In-the-money

Describes an option that has intrinsic value, where a call option's strike price is below the market price of the underlying asset, or a put option's strike price is above it.

Intrinsic Value

The perceived or calculated real value of an asset, investment, or company based on fundamental analysis without regard to its market value.

Put Option

A financial contract that gives the holder the right, but not the obligation, to sell a specified amount of an underlying asset at a predetermined price within a specified time frame.

Black-Scholes Option Pricing Model

A mathematical model for pricing European-style options, assessing the variations in market conditions over time.