Which One of the Following Terms Is Defined as an Option

question 11

Multiple Choice

Which one of the following terms is defined as an option that would have a positive payoff if exercised now?

• A) in-the-money option
• B) out-of-the-money option
• C) straddle
• D) crossed option
• E) cash-settled

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Definitions:

APR

Annual Percentage Rate; the annual rate charged for borrowing or earned through an investment, including any fees or additional costs associated with the transaction.

Loan

A sum of money that is borrowed, which must be paid back with interest, typically used for significant purchases, investing, or to cover cash flow shortfalls.

Balloon Loan

A type of loan that has low, fixed monthly payments for a period of time, followed by a large payment for the remaining amount due at the end of the term.

Amortized

Refers to the process of paying off debt over time in regular installments of interest and principal sufficient to repay the loan in full by its maturity date.