Which of the Following Statements Is False

question 6

Multiple Choice

Which of the following statements is false?

• A) A call option will sell for a fraction of the cost of the stock.
• B) A futures contract can be written for a commodity (such as wheat),or for a currency.
• C) A futures contract gives the owner the right,but not the obligation,to buy or sell a commodity at a specified price on a given future date.
• D) The specified price at which an option gives the owner the right to buy a stock at is called the stick price.

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Definitions:

Binomial Model

An option-valuation model predicated on the assumption that stock prices can move to only two values over any short time period.

Exercise Price

The specified price at which the option holder can buy (in the case of a call option) or sell (in the case of a put option) the underlying asset.

Binomial Model

A mathematical model for pricing options that uses a discrete-time framework to trace the evolution of option prices over time.

Risk Free Interest Rate

The theoretical rate of return on an investment with zero risk, typically represented by the yield on government bonds.