If You Buy the March Put and Don't Exercise Before

question 51

Multiple Choice

If you buy the March put and don't exercise before contract maturity, you will make a profit if the stock price at maturity _______________________ from today's price.

• A) increases by more than 9.65%
• B) increases by more than 4.57%
• C) decreases by more than 3.94%
• D) decreases by more than 11.99%
• E) does not decrease by more than 5.64% [(50 - 6.55)/45.23] - 1

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Definitions:

Maximizing Utility

The economic principle aiming to achieve the highest level of satisfaction possible with available resources.

Price

The cost at which something is being sold, reflecting the value that consumers or purchasers assign to a good or service.

Utility

An economic term referring to the total satisfaction received from consuming a good or service.

Marginal Utility

The increased gratification or utility derived from the consumption of an extra unit of a good or service.