Which One of the Following Statements Concerning Option Payoffs Is

question 62

Multiple Choice

Which one of the following statements concerning option payoffs is correct?

• A) The buyer of a call profits when the exercise price exceeds the market price.
• B) The buyer of a call profits when the strike price exceeds the exercise price.
• C) A put will only be exercised if both the seller and the buyer can profit.
• D) Both the buyer and the seller profit when a call is exercised.
• E) The seller of a put incurs a loss when a put is exercised.

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Definitions:

Physical Capital

Manufactured productive resources, such as buildings and machines; often referred to simply as “capital.”

Factor Market

A marketplace for the services of a factor of production, such as labor, capital, or land.

Labor

Human effort, whether physical or mental, used in the production of goods and services.

Circular-Flow Diagram

A pictorial scheme of the economy, focusing on the exchange of dollars between households and firms through the market system.