If You Consider the Equity of a Firm to Be

question 21

Multiple Choice

If you consider the equity of a firm to be an option on the firm's assets then the act of paying off debt is comparable to ________ on the assets of the firm.

• A)purchasing a put option
• B)purchasing a call option
• C)exercising an in-the-money put option
• D)exercising an in-the-money call option
• E)selling a call option

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Definitions:

Skills

The abilities and expertise acquired through training or experience that enable an individual to perform tasks effectively.

Natural Rate

The level of unemployment or interest that exists when an economy is balanced, not affected by short-term fluctuations or cyclical, structural factors.

Price Level

The combined average cost of all goods and services manufactured within the economy.

Deflation

A decrease in the general price level of goods and services, often indicating an economy in contraction.