A Situation in Which Early Exercise of an American Put

question 33

Multiple Choice

A situation in which early exercise of an American put can be justified is

• A)bankruptcy
• B)merger
• C)if X exceeds S₀ by greater than any transaction costs.
• D)both a and b
• E)both a and b and c

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Definitions:

Net Operating Income

A company's revenue minus its operating expenses, not including taxes and interest, reflecting the profit generated from regular business operations.

Fixed Expenses

Costs that remain constant for a period of time irrespective of the level of outputs, like rent, salaries, and insurance premiums.

Operating Results

The financial outcomes of a company's business activities, including revenue, expenses, and profit, over a certain period.

Sales Commissions

Fees paid to sales personnel based on the amount of sales revenue they generate.