Which Is the Best Definition of a Call Option

question 106

Multiple Choice

Which is the best definition of a call option?

• A)The right to buy an asset at a fixed price during a particular time period.
• B)The right to sell an asset at a fixed price during a particular time period.
• C)A security that gives the holder the right to purchase shares of a stock at a fixed price over a period of time.
• D)The act of buying or selling the underlying asset via the option contract.

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Definitions:

Expected Rate of Inflation

An estimate of the rate at which the general level of prices for goods and services will rise over a period.

Annual Real Rate

The annual rate of return on an investment, adjusted for inflation, indicating the real increase in the value of the investment over a year.

Inflation Rate

The pace at which prices for goods and services increase, leading to a decrease in purchasing power.

Nominal Rate of Interest

The advertised interest rate on a loan or investment, not accounting for inflation.