The Period Over Which a Call or Put Option Exists

question 61

Multiple Choice

The period over which a call or put option exists is

• A)determined by its delivery date.
• B)determined by its expiration date.
• C)determined by whether the contract is written for a commodity or for a financial instrument.
• D)indeterminate; options contracts continue in existence until either the buyer or the seller desires to discontinue it.

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Definitions:

Capital Budgeting

Capital budgeting involves the process of evaluating and selecting long-term investments that are in line with the goal of shareholder wealth maximization.

After-tax Cash Flow

The amount of money a company or individual has left after paying all taxes, crucial for understanding actual financial health.

Incremental Cash Flows

The additional cash flow a company receives from undertaking a project or making a decision.

Pro Forma

A method of calculating financial results to emphasize either current or projected figures.