The Main Difference Between an American and a European Option

question 4

Multiple Choice

The main difference between an American and a European option is that

• A) European options are priced in Euros and American options are priced in dollars.
• B) American options can be exercised at any time until expiration while European options can only be exercised on expiration date
• C) European options can be exercised at any time until expiration while American options can only be exercised on expiration date
• D) American options are standardized contracts while European options are not.

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Definitions:

Earnings per Share

A measure of a company's profitability, calculated as the net income divided by the number of outstanding shares of its common stock.

Net Income

The total earnings of a company after deducting all expenses, taxes, and costs from its total revenue.

Common Shares

Equities owned in a corporation, representing a share of the company's profits and a right to vote on certain matters.

Acid-Test Ratio

A financial metric used to determine a company's short-term liquidity position by comparing its most liquid assets (excluding inventory) to its current liabilities.