Which of the Following Best Defines an Option

question 268

Multiple Choice

Which of the following best defines an option?

• A) The lower bound of an option's value, or what the option would be worth if it were about to expire.
• B) A contract that gives its owner the right to buy or sell some asset at a fixed price on or before a given date.
• C) The value of a convertible bond if it could not be converted into common stock.
• D) The right to sell an asset at a fixed price during a particular period of time. The opposite of a call option.
• E) An option with payoffs in real goods.

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Definitions:

Tariff

is a tax imposed by a government on goods and services imported from other countries to protect domestic industries from foreign competition.

Domestic Price

The price of goods or services within a country, influenced by local demand and supply conditions, taxes, and other internal factors.

Carnations

A type of flower known for its distinct, clove-like scent and its popularity as a gift or decorative plant.

Free-Trade Situation

An economic environment where goods and services can be traded across borders without regulatory barriers such as tariffs, quotas, or subsidies.