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:

Government Spending

Expenditures by government entities on goods and services, including infrastructure, public services, and social welfare programs.

GDP

Totaling the market value of all final goods and services produced inside a country within a set period results in the Gross Domestic Product.

Inflations

The speed at which the overall price level of goods and services increases, leading to a decrease in buying power.

Taxes

Compulsory financial charges imposed by a government on individuals or entities to fund public expenditures.