A Call Option Whose Exercise Price Is Less Than the Spot

question 65

Multiple Choice

A call option whose exercise price is less than the spot price is said to be:

• A) in-the-money.
• B) at-the-money.
• C) out-of-the-money.
• D) under-the-spot.

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Definitions:

Variable

In the context of mathematics or statistics, a symbol that represents an unknown or changeable quantity.

Capital Restructuring

The process of reorganizing a company's capital structure, including changing the mix between debt and equity financing.

Debt Financing

Raising capital through the sale of bonds, bills, or notes to individuals or institutional investors. In return for lending the money, the individuals or institutions become creditors and receive a promise to repay principal and interest on the debt.

Financial Risk

The possibility of losing money or the uncertainty in achieving the expected returns mainly due to market movements, interest rates, or credit failure.