A Call Option

question 19

Multiple Choice

A call option

• A)gives the owner of the option the right to buy the underlying asset for a specified price within a specified period of time if the owner wishes to exercise his option.
• B)obligates the owner of the option to buy the underlying asset for a specified price at a specified point in time unless the owner closes out his position.
• C)gives the owner of the option the right to sell the underlying asset at a specified price within a specified period of time if the owner wishes to exercise his option.
• D)obligates the owner of the option to sell the underlying asset for a specified price at a specified point in time unless the owner closes out his position.

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Definitions:

Selling Price

The amount of money a buyer pays to purchase an item or service from a seller.

Initial Value Method

An accounting method in which an investment is initially recorded at cost, with subsequent changes in value not typically recognized.

Consolidated Worksheet

A tool used in the preparation of consolidated financial statements that helps in adjusting and eliminating entries for consolidation purposes.

Investment

Assets that are purchased with the expectation that they will generate income or appreciate in the future.