Consider Three Put Options at Strikes 40, 50, and 60

question 16

Multiple Choice

Consider three put options at strikes 40, 50, and 60. The price of the 40-strike option is $4 and the price of the 60-strike option is $8. Which of the following statements is most accurate? (Assume all options have the same maturity.)

• A) The price of the 50-strike put is less than $10.
• B) The price of the 50-strike put is less than $6.
• C) The price of the 50-strike put is greater than $6.
• D) The price of the 50-strike put is greater than $7.

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Definitions:

Labor-Supply Curve

A graph that shows the relationship between the wages workers receive and the amount of labor they are willing to supply.

Wage Affected

The impact on employees' earnings due to various factors like inflation, demand for labor, or changes in government policy.

Marginal Product

The growth in production resulting from one more unit of input.

Equilibrium Wage

The wage rate at which the quantity of labor supplied equals the quantity of labor demanded in the labor market.