Suppose That a Stock Sells at a Price of $40

question 26

Multiple Choice

Suppose that a stock sells at a price of $40 on the expiration date. Compute the payoff to the seller of a put option if the option strike price is $50.

• A) -$20
• B) -$10
• C) 0
• D) $40

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Definitions:

Quality of Income

A measure of how easily a firm's accounting income can be converted into cash, reflecting the company's financial stability.

Price/Earnings Ratio

A financial ratio that measures a company's share price relative to its earnings per share, indicating how much investors are willing to pay per dollar of earnings.

Dividend Yield

A monetary ratio demonstrating the proportion of yearly dividends distributed by a corporation in relation to its share value.