Consider the Following Equation: C = S - K

question 41

Multiple Choice

Consider the following equation: C = S - K + dis(K) + P - PV(Div)
In this equation,dis(K) + P - PV(Div) tells us:

• A)the market value of the option.
• B)the difference in the price of an American option over a European option because of dividend capture.
• C)the intrinsic value of the option.
• D)the time value of the option.

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Definitions:

Incentive

An external stimulus that motivates behavior (for example, money or fame).

Drive-Reduction Theory

A theory suggesting human behavior is motivated by the desire to reduce internal drives of needs, such as hunger.

Getting Some Food

The act of obtaining food to satisfy hunger, which can encompass a range of behaviors from purchasing food at a store to preparing a meal.

Sleeping

The natural state of rest for the mind and body, characterized by altered consciousness and reduced sensory activity.