Which of the Following Statements Is True

question 26

Multiple Choice

Which of the following statements is true?

• A) Both call and put options are in the money if the stock price is above the exercise price.
• B) Both call and put options are in the money if the stock price is below the exercise price.
• C) Call options are in the money if the stock price is above the exercise price. Put options are in the money if the stock price is below the exercise price.
• D) Call options are in the money if the stock price is below the exercise price. Put options are in the money if the stock price is above the exercise price.

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Definitions:

Financial Break-even

The point at which total revenue equals total costs and expenses, leaving the company with no net profit or loss.

Variable Cost

Costs that move in correspondence with the quantity of products made or services sold.

Fixed Costs

Expenses that do not vary with production volume or business activity level, such as rent, salaries, and insurance premiums.

Operating Leverage

A measure of how revenue growth translates into growth in operating income, indicating the extent to which a firm uses fixed versus variable costs.