An Option That Can Be Exercised on or Before Its

question 32

Multiple Choice

An option that can be exercised on or before its maturity is known as a(n)

• A) American option.
• B) barrier option.
• C) European option.
• D) Swiss option.

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Definitions:

Appreciation

The increase in the value of an asset over time, which can affect investments, real estate, and other properties due to a variety of factors such as demand and inflation.

Default Risk

The risk that a borrower will not make the required payments on their debt obligations.

U.S. Treasury Bonds

Long-term government debt securities issued by the United States Department of the Treasury with maturity periods over 20 years, offering a fixed interest rate.

Coupon Rate

The coupon rate is the annual interest payment made to bondholders, expressed as a percentage of the bond's face value.