An Investor Who Purchases a Call Option

question 16

Multiple Choice

An investor who purchases a call option:

• A) Has the right to buy a given stock at a specified price during a designated time period.
• B) Has the right to sell a given stock at a specified price during a designated time period.
• C) Has the obligation to buy a given stock at a specified price during a designated time period.
• D) Has the obligation to sell a given stock at a specified price during a designated time period.
• E) None of the above.

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Definitions:

Yield To Maturity

The total return anticipated on a bond if it is held until the date of maturity, accounting for both interest payments and the principal repayment.

Debt

An amount of money borrowed by one party from another, under the condition it is to be paid back usually with interest.

WACC

The Weighted Average Cost of Capital represents the average cost of capital for a company, where each type of capital is weighted according to its proportion in the overall capital structure.

Market Value

The current monetary value assigned to buying or selling an asset or service in the open market.