Exercising the Option Can Best Be Defined As

question 285

Multiple Choice

Exercising the option can best be defined as:

• A) The act of buying or selling the underlying asset via the option contract.
• B) The fixed price in the option contract at which the holder can buy or sell the underlying asset. Also the exercise price or strike price.
• C) The last day on which an option can be exercised.
• D) The change in the stock price divided by the change in the call price.
• E) A feature included in the terms of a new issue of debt or preferred shares to make the issue more attractive to initial investors.

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Definitions:

Capital Budgeting

The process of evaluating and selecting long-term investments that are in line with the goal of an organization's wealth maximization.

Tax Rate

The ratio at which taxes are imposed on a person or business entity.

After-Tax Discount Rate

The discount rate that is applied to cash flows after taking into account the effects of taxes.

Working Capital

A financial metric representing the difference between a company's current assets and current liabilities, indicating short-term liquidity.