Which of the Following Statements Is FALSE

question 56

Multiple Choice

Which of the following statements is FALSE?

• A)Because a short position in an option is the other side of a long position,the profits from a short position in an option are just the negative of the profits of a long position.
• B)The deeper out-of-the-money the put option is,the less negative its beta,and the higher is its expected return.
• C)Although payouts on a long position in an option contract are never negative,the profit from purchasing an option and holding it to expiration could well be negative because the payout at expiration might be less than the initial cost of the option.
• D)The put position has a higher return in states with low stock prices;that is,if the stock has a positive beta,the put has a negative beta.

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Definitions:

Total Utility

The complete satisfaction received from consuming a particular quantity of goods or services.

Consumer's Income

The total amount of money earned by a consumer, influencing their purchasing power and spending behavior.

Equilibrium

A state of balance or stability within a system where opposing forces or influences are equal and cancel each other out.

Marginal Utility

The supplementary satisfaction or advantage received from consuming one more unit of a good or service.