When a Stock Index Option Is Exercised, the Cash Payment

question 50

Multiple Choice

When a stock index option is exercised, the cash payment is equal to a specified dollar amount

• A) multiplied by the index level.
• B) multiplied by the exercise price.
• C) multiplied by the difference between the index level and the exercise price.
• D) multiplied by the sum of the index level and the exercise price.

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Definitions:

Utility Function

A mathematical representation describing how individuals rank different bundles of goods based on the level of satisfaction or utility they provide.

Wealth

The total value of all the financial assets and physical possessions owned by an individual, household, or nation, excluding liabilities.

Groin Vault

An architectural feature formed by the intersection at right angles of two barrel vaults, often used in Romanesque and Gothic buildings.

Barrel Vaults

A simple form of vault consisting of a continuous surface of semicircular or pointed sections resembling a barrel or tunnel.