Select the Most Accurate Alternative

question 16

Multiple Choice

Select the most accurate alternative. The theta of an in-the-money cash-or-nothing call option is

• A) Positive, as is the case for any call.
• B) Positive, because payoffs are the same once you are in-the-money and more time to maturity only increases the possibility of moving out of the money.
• C) Negative, because payoffs are the same once you are in-the-money and more time to maturity only increases the possibility of moving out of the money.
• D) Negative, as is the case for any call.

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Definitions:

Fixed Costs

Expenses that do not change with the level of goods or services produced by a business.

Raw Materials

Basic goods used in the production of final products.

Barrier to Entry

Factors that prevent or hinder companies from entering a specific market, such as high startup costs, stringent regulations, or strong competition.

Personnel Shortages

Situations where there are not enough employees to handle the work required, often affecting service and production levels.