A local retail store allows you to return the merchandise you purchase and get your money back for up to 30 days after the purchase date. The store has, in effect, provided each shopper with _______________ options.

Question

Quizplus · Accepted Answer

An American put option allows the holder to sell an asset at a specified price at any time before the expiration date. Similarly, the store's policy allows customers to return the merchandise (effectively "sell" it back to the store) at the purchase price anytime within 30 days, matching the characteristics of an American put option.

A Local Retail Store Allows You to Return the Merchandise