What Is a "Call" Option

question 25

Multiple Choice

What is a "call" option?

• A)A contract that gives the holder the right to sell an instrument at a pre-specified price.
• B)A contract that is derived from some other underlying quantity,index,asset or event.
• C)A contract that gives the holder the right to acquire an instrument at a pre-specified price.
• D)A contract that gives the holder the right to buy or sell something at a specified price.

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Definitions:

Prudently

Acting with or showing care and thought for the future, often within the context of managing finances or making financial decisions.

Ex-Dividend Date

The cutoff date established by a company by which investors must be on the company's books to receive the next dividend payment.

Homemade Dividend Policy

A strategy in which investors create their own dividend policy by selling a portion of their portfolio of equities.

Residual Dividend Approach

A method used by companies to determine the dividend payments based on the residual or leftover earnings after all operational and investment costs have been met.