Which of the Following Is NOT a Real Option

question 5

Multiple Choice

Which of the following is NOT a real option?

• A) The option to expand production if the product is successful.
• B) The option to buy shares of stock if its price goes up.
• C) The option to expand into a new geographic region.
• D) The option to abandon a project.
• E) The option to switch the type of fuel used in an industrial furnace.

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Definitions:

Convexity

An indicator of how the bond price's sensitivity to interest rate changes varies with the bond's yield, reflecting adjustments in the bond's duration.

Basis Points

A unit of measure used in finance to describe the percentage change in the value or rate of a financial instrument.

Duration Mismatch

The disparity between the sensitivity of asset prices and liability values to changes in interest rates, affecting firms and financial institutions' balance sheets.

S&P 500

A market index representing 500 of the largest companies listed on American stock exchanges.