Consider the Following Equation: B_option = B_S

question 34

Multiple Choice

Consider the following equation: b_option = b_S + b_B
The term b_B is

• A) always equal to zero since b_B = 0.
• B) always positive since B is always positive.
• C) could be positive or negative depending on whether the option in question is a put or a call.
• D) always negative since B is always negative.

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Definitions:

Excess Supply

A situation where the quantity of a good or service supplied exceeds the quantity demanded at the current price, leading to surplus.

Sunglasses

Protective eyewear designed to prevent bright sunlight and high-energy visible light from damaging or discomforting the eyes.

Price

The amount of money expected, required, or given in exchange for something else; a fundamental economic concept that represents the value of a good or service.

Excess Demand

A situation in a market where the quantity demanded of a product exceeds the quantity supplied at a given price, leading to upward pressure on prices.