A Call Option Is an Agreement That

question 96

Multiple Choice

A call option is an agreement that:

• A)obligates both the buyer and seller to a future transaction.
• B)grants the seller the right to buy a security at a predetermined price.
• C)gives the buyer the right to purchase an asset at some point in the future.
• D)grants the seller the right, but not the obligation, to sell an asset.
• E)presets a price but not a time period.

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Definitions:

Risk

The exposure to the chance of loss or damage, often quantified in terms of probability and impact.

Licensing

Granting of permission by the owner of a product, service, or intellectual property to another party to use it under defined conditions.

Direct Investment

A form of investment where individuals or companies purchase a direct interest in a foreign firm or undertake a new venture in another country.

Potential Profits

The anticipated earnings that a business or investment may generate in the future.