When Are Costs Relevant to a Particular Decision

question 155

Multiple Choice

When are costs relevant to a particular decision?

• A)If they are fixed costs
• B)If they differ across the alternatives being considered
• C)If they are variable costs
• D)If they remain unchanged across the alternatives being considered

---

Definitions:

Maximum Potential Profit

The highest possible gain that may be achieved on a trade or investment, assuming the most favorable set of circumstances.

Call Contract

An agreement giving the option buyer the right to buy a specified quantity of a security at a set price within a specific time frame.

Options Exercised

The act of implementing the right to buy (call option) or sell (put option) an underlying asset at a predetermined price before the option expires.

Horizontal Spread

An options strategy involving the purchase and sale of two options of the same type and expiration date but different strike prices.