Credit Options Are Contracts Where the Purchaser Gains the Right

question 11

Multiple Choice

Credit options are contracts where the purchaser gains the right to receive profits that are tied to ________.

• A) the obligation to buy or sell an underlying asset
• B) the price of an underlying security or to an interest rate
• C) the right to hold an underlying asset
• D) the right to switch payment streams

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Definitions:

Opportunity Cost

The loss of potential gain from other alternatives when one alternative is chosen over others.

Consumer Surplus

The difference between the total amount that consumers are willing and able to pay for a good or service and the total amount they actually do pay.

Price Elasticity

The determination of how price alterations influence the market demand for a commodity.

Marginal Value

The additional satisfaction or utility received by consuming one more unit of a good or service.