Which One of the Following Situations Will Produce the Highest

question 68

Multiple Choice

Which one of the following situations will produce the highest call price, all else constant? Assume the options are all in the money.

• A)$20 strike price; 45 days to option expiration
• B)$20 strike price; 60 days to option expiration
• C)$25 strike price; 45 days to option expiration
• D)$25 strike price; 60 days to option expiration
• E)Insufficient information is provided to answer this question.

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Definitions:

Consumer Surplus

The separation between the theoretical price consumers are willing to pay for a good or service and the practical price they pay.

Point Price Elasticity

A measure of how the quantity demanded of a good responds to a change in the price of that good, calculated at a specific point on the demand curve.

Quarterly Demand

The total quantity of a good or service that consumers are willing and able to purchase at a given price over the span of three months.

Per Capita Consumption

Measures the average amount of a good or service consumed per person within a population over a specific period.