If You Buy a European Call Option on Canada Bonds

question 26

Multiple Choice

If you buy a European call option on Canada bonds with a strike price of 120 assuming that the premium is $0, and on the maturity date the market price of Canada bonds is 123, you will ________ the option in order to make a profit of $________.

• A) not exercise; 3000
• B) not exercise; 3
• C) exercise; 3000
• D) exercise; 3

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Definitions:

Cost of Goods Sold

the direct costs tied to the production of goods sold by a company, including both raw material costs and labor costs.

Net Sales

The total revenue a company earns after deducting returns, allowances for damaged or missing goods, and any discounts allowed.

Nonoperating Income

Income derived from activities not related to a company's core business operations, such as investment income or gains from the sale of assets.

Operating Expenses

Costs related to the day-to-day operations of a business, such as rent, utilities, and payroll.