Which One of the Following Situations Will Produce the Highest

question 51

Multiple Choice

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

• A)$15 strike price; 45 days to option expiration
• B)$15 strike price; 60 days to option expiration
• C)$20 strike price; 45 days to option expiration
• D)$20 strike price; 60 days to option expiration
• E)Insufficient information is provided to answer this question.

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Definitions:

Variable Cost

A cost that varies with the level of output or activity, such as materials and labor costs.

Operating Leverage

A financial ratio that measures the degree to which a firm or project can increase operating income by increasing revenue.

Operating Income

The income earned from a company's day-to-day operations, calculated before taking into account interest and taxes.

Margin Of Safety

The difference between actual sales and break-even sales, providing a cushion against which sales can fall before a business incurs a loss.