Series 7 - General Securities Representative Exam

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An investor that bought a put option on a stock will make a profit when the put is exercised if

The stock price exceeds the exercise price
A
The stock price falls below the exercise price
B
The stock price falls below the exercise price plus minus the premium that was paid
C
The stock price exceeds the exercise price plus the premium that was paid
D

Explanations

Exercising a long put option results in being short in the underlying stock. To make a profit when exercising a long put, the stock price must decline below the strike price minus any premium paid for the put