A payoff profile is a plot showing how price changes affect the:
A) Total present value of a firm.
B) Time at which an option should be exercised.
C) Future value of a firm.
D) Risk level associated with a contract.
E) Gains and losses on a contract.

Question

Quizplus · Accepted Answer

A payoff profile specifically illustrates the gains and losses associated with a contract, such as an options contract, as the price of the underlying asset changes. This helps investors understand the potential outcomes of their investment decisions.

A Payoff Profile Is a Plot Showing How Price Changes