USE THE INFORMATION BELOW FOR THE FOLLOWING PROBLEM(S)

question 17

Multiple Choice

USE THE INFORMATION BELOW FOR THE FOLLOWING PROBLEM(S)

-Refer to Exhibit 16.1. How much must an investor pay for one put option contract?

• A) $680
• B) $815
• C) $340
• D) $625
• E) $590

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Definitions:

Willingness To Pay

The maximum amount an individual is ready to spend to acquire a good or service.

Expected Revenue

The forecasted amount of money that a business anticipates receiving over a certain period, based on projected sales volume and unit price.

Probability

A gauge for the chances of an event taking place, measured by numbers from 0 to 1.

English Auction

A type of auction in which the price ascends and participants bid openly against one another, with the item going to the highest bidder.