Josh Opted to Exercise His January Option at the End

question 22

Multiple Choice

Josh opted to exercise his January option at the end of December and paid $3,250 at that time to acquire 100 shares of stock.Which one of the following did Josh own?

• A)American call
• B)American put
• C)European call
• D)European put
• E)European convertible bond

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Definitions:

Clear Preferences

The concept in decision theory and economics where consumers or decision-makers have well-defined preferences, allowing for consistent choices among sets of alternatives.

Budget Constraints

Constraints that consumers face as a result of limited incomes.

Endowment Effect

Tendency of individuals to value an item more when they own it than when they do not.

Reference Point

A basis or standard for evaluation, comparison, or judgment.