- CFA Exams
- CFA Exam: Level I 2021
- Study Session 16. Derivatives
- Reading 49. Basics of Derivative Pricing and Valuation
- Subject 9. Put-Call Parity

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**CFA Practice Question**

Dolores has studied payoff tables to determine the possible payoffs from buying a call option. This exercise will help her determine ______.

B. the cash outflow from the possible outcomes

C. the underlying stocks volatility

D. the price to pay for the option

A. whether to purchase an American or European option

B. the cash outflow from the possible outcomes

C. the underlying stocks volatility

D. the price to pay for the option

Correct Answer: D

Payoff tables are studied to determine the price to pay for the option.

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**User Contributed Comments**
13

User |
Comment |
---|---|

gth763s |
What is a payoff table? |

AusPhD |
What do you think it is? It is a 'table' that includes the option's 'payoffs'... |

dah62 |
If you're not capable or willing to do more than state the obvious, don't answer the question AusPhD. It doesn't impress anyone. |

fubar |
what a tool!! PhD!!! |

moghizz |
easy guys easy..... |

nofxmeosker |
haha, CFA candidate cage-fight! |

JakeZ |
Geek fight! :) |

Paulvw |
Payoff tables may be used when valuing options by means of binary tree methods (reading 62). Their contribution to the process for a call option is minimal, however. It's drawing a long bow to have D as the answer, and I'd say that none of the answers given is correct. BUT from bitter experience this is JUST the sort of question we can expect in the exam :( |

gill15 |
I'm assuming gth763 is older then AusPhd....and Phd has some anger issues....and if Phd has to put Phd as a part of his Login name to prove a point I'm assuming he's got insecurity issues cause he's tiny... I'm putting my money on gth763... |

ldfrench |
BATTLE ROYALE!!!!!! |

zzhumanov |
you've made my day, dudes!!! |

Inaganti6 |
look at all these keyboard warriors one guy needs PhD in his login name to validate himself, another seems to narrate the situation without knowing the difference between then and than. best not to read the comments on AN if you got the answer right massive waste of time comments are in that case. |

ashish100 |
^ massive waste of time right here.. |