A Digital Default Option

question 9

Multiple Choice

A digital default option

• A)always pays the par value of a loan if exercised.
• B)has a payout that is capped at 80 percent of the par value of the loan.
• C)will cause the FI never to lose more than the premium paid to purchase the option.
• D)always pays the par value of a loan if exercised and will cause the FI never to lose more than the premium paid to purchase the option.
• E)always pays the par value of a loan if exercised and has a payout that is capped at 80 percent of the par value of the loan.

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