From the Law of One Price,the Value of Any Security

question 18

Multiple Choice

From the Law of One Price,the value of any security is determined by ________ an investor receives from owning it.Therefore,before we can assess what an option is worth,we must determine an option's ________ at the time of expiration.

• A) the current cash flows ; payoff
• B) the future cash flows ; price
• C) the present cash flows ; price
• D) the future cash flows ; payoff

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Definitions:

GDP

Gross Domestic Product, the total value of all goods and services produced within a country over a specific time period, reflecting the overall economic health of the country.

Gold Standard

A financial regime where the national currency or banknotes are directly pegged to the value of gold.

Exchange Rate

The rate at which one currency can be exchanged for another.

Determined

A term that implies a firm or persistent resolution to achieve a particular outcome or objective.