The Term [N(d₂)× PV(EX)] in the Black-Scholes Model Represents the

question 10

Multiple Choice

The term [N(d₂) × PV(EX) ] in the Black-Scholes model represents the

• A)call option delta.
• B)bank loan.
• C)put option delta.
• D)present value of a bank loan.

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Definitions:

Agency Problems

Conflicts of interest that arise when there's a separation between the management of a company and its owners.

Corporation

A legal entity that is separate from its owners, with the ability to own assets, incur liabilities, and conduct business.

Unlimited Liability

A legal structure in which the owners are personally liable for all the debts and liabilities of the business, without any limit.

General Partnership

A business arrangement where two or more individuals agree to share in all assets, profits, and financial and legal liabilities of a jointly-owned business.