Consider buying the put option, if the price is lower at the expiration date of option then the ____________?
Correct answer: D. profit will be higher
- A. liquidity will be higher
- B. loss will be higher
- C. profit will be lower
- D. profit will be higher
Explanation
A put option becomes more valuable as the underlying asset's price falls because it gives the buyer the right to sell at the higher exercise price. Thus, a lower expiration price generally produces a higher profit for the put buyer.
Report an error
The more specific you are, the faster it gets fixed. A source beats an opinion.
Prefer email? support@testustad.com
About Business Finance
Business finance explains how organisations plan, obtain and use money while balancing risk, return and liquidity. Topics include financial statements, time value of money, budgeting, working capital, capital structure, sources of finance, investment appraisal and cost of capital. Capital budgeting evaluates long-term projects, whereas working capital manages day-to-day operations.
Practise Business Finance
975 free Business Finance MCQs from Management Sciences, each with the correct answer and an explanation. Unlimited attempts, no account needed.
Exams that ask Management Sciences questions like this
Management Sciences is on 2 papers prepared for on TestUstad, and all of them draw the same bank, so this question is worth knowing for every one of them.
More Business Finance questions
The return to stockholders is 15% and the periodic dividend payments are 11.5% then the gains on capital are ___________?
The type of traders who take position in the market of future, which is based on expectations of prices of underlying assets are classified as ___________?
The position which occurs because of selling floor and buying cap is classified as ___________?
The type of preferred stock whose paid dividends are more than the promised dividends is classified as ____________?
The type of option that gives the right to buyer to sell the underlying option at specific exercise price is considered as _____________?
The speed with which the prices of stocks are adjusted to unexpected news related to interest rates is called __________?