A Call Option Differs from a Put Option in That

question 15

Multiple Choice

A call option differs from a put option in that

• A) a call option obliges the investor to purchase a given number of shares in a specific common stock at a set price; a put obliges the investor to sell a certain number of shares in a common stock at a set price.
• B) both give the investor the opportunity to participate in stock market dealings without the risk of actual stock ownership.
• C) a call option gives the investor the right to purchase a given number of shares of a specified stock at a set price; a put option gives the investor the right to sell a given number of shares of a stock at a set price.
• D) a put option has risk, since leverage is not as great as with a call.
• E) None of the above

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Definitions:

Quantity Demanded

The total amount of goods or services that consumers are willing and able to buy at a specific price level, at a given point in time.

Normal Good

A type of good for which demand increases as the income of consumers increases, and vice versa.

Supply Schedule

A table of numbers showing the amounts of a good or service producers are willing and able to make available for sale at each of a series of possible prices during a specified period of time.

Price-Elasticity

A measure of how the quantity demanded or supplied of a good changes in response to a change in its price.