To Protect Their Investment, Bondholders Could _____ with an Exercise

question 401

Multiple Choice

To protect their investment, bondholders could _____ with an exercise price equal to the amount of the debt.

• A) buy a call option
• B) write a call option
• C) purchase a put option
• D) sell a put option
• E) write both a put and a call option

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Definitions:

Normal Balance

Represents the side (debit or credit) of an account that increases its value, based on the double-entry accounting system.

Debit

An accounting entry that increases an asset or expense account, or decreases a liability or equity account.

Cash Discount Period

A specific time frame during which a buyer can pay less than the full amount due by taking advantage of a discount offered.

Liability Account

A financial accounting term for amounts owed by a business to creditors or others, usually categorized as current or long-term.