Which of the following equations represents a call power option?

Question

Quizplus · Accepted Answer

A call option gives the holder the right (not obligation) to buy an underlying asset at a specified price (strike price) on or before a specified date. The payoff of a call option at expiration can be represented by the formula Max (Sᵃ-Kᵃ,0), where S is the spot price of the underlying asset at expiration, K is the strike price, and a is the power parameter (usually equal to 1). Therefore, option D (Max (Sᵃ-Kᵃ,0)) is the correct equation for a call power option.

Which of the Following Equations Represents a Call Power Option